RBI Uncomfortable With My Leadership Skills, Says IndusInd Bank CEO Kathpalia
This is the second time that the Reserve Bank of India approved Sumanth Kathpalia's extension by a shorter term than the one sought.
The Reserve Bank of India is "not comfortable with my leadership skills" of running IndusInd Bank Ltd., Chief Executive Officer Sumanth Kathpalia said on Monday.
The comments come after the RBI approved last week the re-appointment of Kathpalia as the managing director and CEO of the bank for another year instead of a three-year term that IndusInd had applied for.
"This would have had a bearing as they were aware of the issue. I don’t know what the RBI's rationale is to give me (a) one-year extension, but I think they are not comfortable with my leadership skills of running the bank, and we should respect that," Kathpalia said in an analyst call on the derivative portfolio impact.
Kathpalia added that he remained committed to the bank for the one year of his tenure, and the board would look at whether they need to consider other candidates for the CEO role.
IndusInd had sought Kathpalia's approval for this position for a period of three years. This is the second time that the RBI has approved his extension by a shorter term than the one sought. In 2023, the regulator cleared only a two-year term for Kathpalia.
Shorter extension for Kathpalia also stems from the fact that the bank is already grappling with stress arising from its exposure to the microfinance-institution space.
For the quarter ended December, the bank's MFI book was Rs 32,564 crore, forming 9% of its total loan assets. Total advances grew 12% on year to Rs 3.66 lakh crore.
Additionally, the new findings in its derivative portfolio could have also had a bearing on Kathpalia's tenure extension.
IndusInd Bank found accounting discrepancies in its derivatives portfolio, which has had an impact of 2.35% on the bank’s net worth as of December 2024, it said in an exchange filing. This extension of only one year buttresses the RBI's continued discomfort or lack of full confidence, especially when other banks' MDs and CEOs have been reappointed for three years.
Analysts said a shorter tenure extension would increase governance and other concerns for the bank, such as management transition.
Kathpalia has been serving as the managing director and chief executive officer of the bank since March 24, 2020. He led the core executive team of the bank and has been working with them for over 17 years. He has had over 37 years of experience in large multinational banks like Citibank, Bank of America, and ABN AMRO before joining IndusInd.
