Shares of Kotak Mahindra Bank Ltd. were the most hit among peers after the Reserve Bank of India capped founder’s tenure as chief executive officer of a bank to 15 years.
That gives the world’s wealthiest banker Uday Kotak less than three years to find a successor, according to a note by Suresh Ganapathy, an analyst at Macquarie Capital Securities Ltd. Kotak’s current tenure as CEO of India’s fourth-largest private lender ends on Jan. 1, 2024.
Once Kotak’s tenure ends he is not eligible for reappointment as the banker has already completed 15 years as the managing director and chief executive officer of the lender, Ganapathy wrote in the note. Also, joint managing director Dipak Gupta, the second in line, “may not be eligible to succeed Kotak as the CEO as the 15-year cap applies for all whole-time directors on the board” as well, according to the note.
Kotak Mahindra Bank’s shares fell 1.5% in Mumbai at 1:29 pm in comparison to a 0.6% rise in a gauge of banking stocks.
To enable a smooth transition, lenders have until Oct. 1 to comply with the new rules and founder-CEOs will be allowed to complete their current terms, the RBI said in a statement Monday.
Kotak has a net worth of $14.4 billion, according to the Bloomberg Billionaires Index. The banker set up an investment company in 1985, which converted into a lender in 2003 and Kotak has led the bank since then.
The RBI had approved a three-year extension from Jan. 1 for Kotak to continue as chief executive officer of Kotak Mahindra Bank. Representatives for the lender didn’t immediately respond to emails and calls for comment.