Indian Banking And Succession Planning Masterclass In What Not To Do

At its heart, succession planning isn’t just about picking the next person for the job; it’s the ultimate test of whether an institution is built to last. If a well-run bank is a fortress, leadership transitions should be as seamless as the change of guards at Buckingham Palace. But if the mere thought of a CEO leaving sends shockwaves through an organisation, one has to ask—was it ever a bank, or just a fiefdom with better branding?

The irony is almost poetic. Banks expect corporate governance in businesses they finance—insisting on independent directors, succession frameworks, and robust oversight. But when it’s time to practise what they preach, suddenly, everything becomes negotiable. Boardrooms, supposedly the citadels of governance, often resemble spectators at a cricket match, waiting for the final over to decide the game. Instead of shaping succession plans proactively, they shuffle awkwardly until a decision is forced upon them.

Regulators, too, find themselves in a predicament. Stability in banking leadership is crucial, but stability shouldn’t mean permanence. Yet, the approach feels less like governance and more like an impromptu game of musical chairs—some CEOs get extensions, others don’t. What is so difficult in having one rule for the sector? Why does every CEO transition feel like a thriller with an unpredictable ending rather than a well-rehearsed handover?

In Indian banking, the CEO’s chair is less of a role and more of a family heirloom—held onto tightly, passed around selectively, and often leaving everyone wondering if it will ever be vacated. Tenures stretch, extensions are granted with the casual inevitability of an extra helping at a family dinner, and leadership transitions are treated less as an institutional necessity and more as an unfortunate disturbance to the status quo. For an industry that thrives on discipline, structure, and risk mitigation, the approach to succession planning is strangely reminiscent of a roadside tea stall—chaotic, unpredictable, and running entirely on personal equations.

At its heart, succession planning isn’t just about picking the next person for the job; it’s the ultimate test of whether an institution is built to last. If a well-run bank is a fortress, leadership transitions should be as seamless as the change of guards at Buckingham Palace. But if the mere thought of a CEO leaving sends shockwaves through an organisation, one has to ask—was it ever a bank, or just a fiefdom with better branding?

The irony is almost poetic. Banks expect corporate governance in businesses they finance—insisting on independent directors, succession frameworks, and robust oversight. But when it’s time to practise what they preach, suddenly, everything becomes negotiable. Boardrooms, supposedly the citadels of governance, often resemble spectators at a cricket match, waiting for the final over to decide the game. Instead of shaping succession plans proactively, they shuffle awkwardly until a decision is forced upon them.

Regulators, too, find themselves in a predicament. Stability in banking leadership is crucial, but stability shouldn’t mean permanence. Yet, the approach feels less like governance and more like an impromptu game of musical chairs—some CEOs get extensions, others don’t. What is so difficult in having one rule for the sector? Why does every CEO transition feel like a thriller with an unpredictable ending rather than a well-rehearsed handover?

The myth of the irreplaceable CEO is particularly persistent. Every bank should have a leadership pipeline robust enough to replace its top executive without anyone breaking into a sweat. But if a bank struggles to find a successor, is it because it genuinely lacks talent, or because no one ever bothered to groom one? It’s a bit like realising too late that you should have taught your teenager how to drive, except here, the consequences involve a few billion dollars.

Long-serving CEOs, of course, will swear that their continued presence is for the greater good. And why wouldn’t they? The longer they stay, the more the organisation bends to their ambitions—aggressive targets, flexible risk appetites, and performance metrics that align suspiciously well with their incentives. Over time, the institution begins to look less like a bank and more like an extension of their biography.

Bank boards, supposedly the guardians of institutional integrity, often function like reluctant referees—technically in charge, but hesitant to blow the whistle. Independent directors, after a few years on the board, tend to settle in so well that independence becomes more of a fond memory. If boardrooms won’t ask the tough questions, who will? Certainly not the CEO who just received yet another extension.

And then there’s the customer. What happens when a CEO-centric bank suddenly loses its leader? Should depositors worry about whether their bank’s stability was tied to one person rather than an institution? If a single leadership change can cause uncertainty, was it ever about the bank’s strength, or just the strength of one individual?

History has shown that some of India’s biggest banking failures have had one common denominator—governance lapses at the top. When CEOs become the defining face of a bank, board oversight weakens, risk-taking becomes more personal than institutional, and succession planning is treated as an afterthought. The paradox is amusing—banks take enormous financial risks daily, but when it comes to a leadership transition, they suddenly become ultra-cautious, like a retiree crossing a busy street.

Regulators need to step up. It’s not enough to set tenure limits; they should demand annual succession plans as a proactive governance measure. CEO transitions should be like well-choreographed performances—structured, predictable, and free from last-minute improvisation.

For all the rhetoric around governance, accountability, and building a resilient banking sector, one truth remains embarrassingly clear: a well-run institution should never struggle with a leadership transition. And yet, Indian banking finds itself stuck in an endless loop—CEOs angling for extended stays, boards treating succession like a game of pass-the-parcel, and regulators making ad hoc calls with no clear logic.

Indian banks are packed with competent professionals, yet somehow, when it’s time for a CEO change, the board acts as if there’s no one suitable in the entire institution. This artificial talent vacuum is more a failure of leadership grooming than an actual lack of leaders. If a company can have a succession pipeline for its middle and senior management, why should the top job be any different? The reluctance to prepare for leadership transitions isn’t about a lack of options—it’s about a lack of will.

The stock market often reacts wildly to banking CEO changes, which is telling. In a well-run institution, leadership transitions should not be a cause for volatility. But when a bank is too dependent on one leader, investors sense instability, and that’s a red flag. If shareholders feel a CEO’s exit is more disruptive than an economic downturn, what does that say about the bank’s leadership depth?

So, the real question isn’t whether banks should be better at succession planning. That much is obvious. The real mystery is—why do they keep pretending they don’t know how?

Dr. Srinath Sridharan is a policy researcher and corporate advisor.

Disclaimer: The views expressed here are those of the author, and do not necessarily represent the views of NDTV Profit or its editorial team.