RBI may scrutinize Kotak's board term

Bank shareholders okayed his board role after MD term ends

- Gopika Gopakumar

The Reserve Bank of India may be examining the proposal to re-appoint billionaire banker Uday Kotak as a non-executive director on the board of Kotak Mahindra Bank after his term ends in December, a person familiar with the matter said.

On 21 April, 99% of the shareholders of Kotak Mahindra Bank voted in favour of naming Uday Kotak as the non-executive non-independent director of the bank after he steps down as the managing director and chief executive officer.

Typically, the appointment of non-executive directors on a bank’s boards does not require RBI’s approval, with the primary responsibility of ensuring whether these directors meet the fit-and-proper criteria residing with the bank’s board. But the regulator could intervene if it feels the appointment fails to meet its fit-and-proper criteria.

According to RBI’s April 2021 guidelines on corporate governance in banks, promoters who are managing directors and chief executives or whole-time directors (WTDs) cannot continue for more than 12 years. But the tenure could be extended to 15 years at the discretion of RBI. “While examining the matter of re-appointment of such MD and CEOs or WTDs within the 12/15 years period, the level of progress and adherence to the milestones for dilution of promoters’ shareholding in the bank shall also be factored in by the Reserve Bank," it said.