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MOSL: FINANCIALS-The changing face of private banks! Will RBI play ball and extend the retirement age for bank CEOs

Financials: The changing face of private banks! Will RBI play ball and extend the retirement age for bank CEOs?

 

• The Indian banking sector is at a critical juncture with MD & CEO of most banks (having ~77% of the private loan market share) either been replaced or retire over FY19-21. Such an event is significant as these banks are either led by CEO’s who have built these banks or have led them for more than a decade.
• Difference in appointment rules between corporates and banks has however invigorated talks of a further extension in the age limit for a bank CEO/Director.
• In this note we present the historical details on CEO continuity across key private banks, assess the importance of top management in building the banking franchise and take a closer look at the appointment rules for directors between private banks/corporates while also presenting a global perspective. 

Unexpected CEO changes have happened; clarity on expected ones awaited: While investors had already braced themselves for the potential management change at HDFC Bank (HDFCB) and IndusInd Bank (IIB), the unexpected management changes at Axis Bank (AXSB), ICICI Bank (ICICIBC) and Yes Bank (YES) in the past one year came as a surprise. According to current regulations, the top management at IIB and HDFCB are set to retire in Mar’20 and Oct’20, as the respective MD & CEOs attain the age of 70 years. If this fructifies, banks having ~77% of (private loan market share) would have witnessed a management change during FY19-21.