Kotak Mahindra Bank refutes media reports, says no RBI communication yet on CEO succession

Private lender Kotak Mahindra Bank on Monday refuted claims made in a news report which claimed the Reserve Bank of India wanted the bank to select someone outside its ranks to succeed billionaire founder Uday Kotak as the next Chief Executive Officer.

Citing sources, news agency Bloomberg said that the RBI has conveyed its view to the board members of Kotak Mahindra Bank and Asia’s richest financier. The regulator is also reviewing whether stakes the banking group holds in two wholly-owned insurance units pose any risks to the firm’s stability.

The bank however has termed claims made in this report "completely incorrect and baseless."

Uday Kotak, who founded Kotak Mahindra Bank, will likely take a non-executive role soon at the private lender. His tenure as Kotak's chief executive and managing director is set to end in December 2023. To be sure, the central bank has put a 15-year tenure cap on chief executive roles at lenders, and Uday Kotak has already led the private bank he founded for more than 18 years.

The RBI order came just days after the central bank had approved a three-year tenure for Kotak starting January 2021.

An outsider coming in as CEO might be “a slight negative and adds uncertainty around management changes,” Jefferies Financial Group Inc. analysts Vinayak Agarwal and Prakhar Sharma said in a note to clients on Monday. By the end of August, “the bank is expected to suggest at least three names in the order of preference, of which the RBI will approve one for appointment,” according to the note.

Kotak Mahindra’s holdings in units — Kotak Mahindra Life Insurance Co. and Kotak Mahindra General Insurance Co. — are also under review as the central bank assesses the banks’ stakes in insurance companies, Bloomberg report said. It is the only major bank in the country with fully-owned insurance subsidiaries.