Succession Planning: Did Private Banks Deliberately Look The Other Way?

Succession planning has a nice ring to it and its importance is discussed ad nauseam by all the CEOs. But when it comes to practice many seem to shy away. In recent times we are getting the taste of it in private sector banks — HDFC Bank and Kotak Mahindra Bank. Interestingly succession planning and governance issue was flagged by the then Reserve Bank of India Governor Shaktikanta Das way back in May 2023 where in a meeting with the boards of both state-run and private banks he talked about governance, ethics, the role of the boards and supervisory expectations. This is what makes Business Standard story titled “Bank boardrooms miss succession memo” written by Consulting Editor Raghu Mohan very interesting. He nails it when he says, “Mint Road’s direction in October 2023 that private banks must have at least two whole-time directors (WTD), including the MD and CEO, was to take care of succession. But the problem continues. This came to the fore with the sudden exits of Sumant Kathpalia at IndusInd Bank, and Srikrishnan Hara Hara Sarma at Karnataka Bank. Prior the circular, hiccups were caused when Shikha Sharma moved out at Axis Bank, Chanda Kochhar at ICICI Bank and Rana Kapoor at Yes Bank. Even in the case of both Aditya Puri at HDFC Bank and Ramesh Sobti at IndusInd Bank, finding their successors took time. While neither of them had formally sought an extension, back-channel talks with RBI were done. This was on whether the age limit for WTDs on private boards could be raised to 75 years from 70 to bring it in alignment with the Companies Act (2013).”