RBI Likely Examining Proposal To Reappoint Uday Kotak As Non-Executive Director: Report

The Reserve Bank of India is reportedly examining a proposal to reappoint Uday Kotak as a non-executive director on the board of Kotak Mahindra Bank after his term ends in December, newspaper Mint reported citing a person familiar with the matter.

Almost 100 per cent 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 earlier this month.

However, the appointment of non-executive directors on a bank’s boards does not require RBI’s approval, the Mint report added.

As per RBI rules on corporate governance in banks, promoters who are managing directors and chief executives or whole-time directors 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," Mint quoted RBI's statement.

While RBI rules do not forbid a promoter CEO from being appointed as a director on the board once his term ends, it is unclear whether such an appointment goes against the spirit of the regulation.

In 2017, Kotak Mahindra Bank agreed to reduce the promoters’ stake in three stages: 30 per cent by 30 June 2017, 20 per cent by 31 December 2018 and finally 15 per cent by 31 March 2020. A year later, the bank decided to sell perpetual non-convertible preference shares to bring down the promoter’s stake ahead of its deadline to trim the stake from 30 per cent to 19.7 per cent. This move was, however, struck down by RBI, Mint report said.

Uday Kotak is founder and managing director of Kotak Mahindra Bank and has led the group in broad range of financial services over 35 years.