Ahead of the end of his term as the Kotak Mahindra Bank's chief executive and managing director, Uday Kotak has said he will be a "non-executive board governance member and a strategic shareholder" going ahead.
In the private sector lender's annual report, the last such message from him as the MD and CEO before he relinquishes the position at the end of 2023, Kotak reminisced about the institution's journey, pointing out that Rs 10,000 invested in 1985 is worth over Rs 300 crore today.
"Going forward, I see my role as a non-executive board governance member and a strategic shareholder with a long term perspective of nurturing a world class institution," Kotak said in the annual report.
Admitting that it is "unusual" for anybody to hold such sway, Kotak said he owns 26 per cent of the bank and a disproportionate family assets are in one stock.
A few years ago, the RBI capped the maximum time which an individual can spend at the helm of a bank at 15 years, due to which Kotak will have to step down from his responsibilities.
The RBI also allowed promoters to hold 26 per cent in lenders, a departure from earlier insistence to get it down to 15 per cent.
Since the announcement of Uday Kotak as a non-executive director on the board, some concerns were raised whether this will get the regulatory nod because in its April 2021 circular, RBI also made it clear that there should be a three year cool-off period before a MD and CEO is reappointed.
However, the bank's chief financial officer Jaimin Bhat had defended the move to appoint Kotak as being in "accordance with law and regulations".
Uday Kotak's son Jay is associated with the bank's consumer business now, and the path his career will take is not yet clear.
If he eventually succeeds his father at the helm, it will be unprecedented in the banking sector where professional managers oversee affairs.
According to reports, the bank has engaged a professional talent spotting firm for choosing Kotak's successor, and some internal candidates including K V S Manian and Shanto Ekambaram are in the reckoning.
Choosing successions is often a tricky exercise for banks, and the choice of a candidate has led to senior executive departures in the past at institutions like HDFC Bank and ICICI Bank.
In his message to shareholders, Kotak said an institution has to outlive individuals including its founders, but stressed on the need for regulations to ensure that entrepreneurship thrives.
"We must let entrepreneurship thrive, as I was fortunate to see in most of my career.
"There is a need to build regulatory trust which requires action on both sides of the aisle," he said in a message directed at policy and regulatory bodies.
Pitching to prevent a "bureaucratisation of financial services", Kotak said, "I feel the financial sector players risk becoming more robotic, curbing the entrepreneurial flair since the fear of making a mistake overrides the joy of creation and development."
It takes product excellence, customer obsession and trust to create a sustainable institution for the future, Kotak said, adding that the bank is in the midst of this mindset shift for these priorities.
The lender initially depended on internal talent but since it became a universal bank in 2003, it has often scouted for the right talent from outside, Kotak said, pointing out that in the last year, it has appointed a new chief technology officer, a chief of customer experience, a head of brand, product and marketing and a chief of retail and commercial risk to drive potentially transformative changes.
He said Indian financial sector needs "significant capacity building" to take the economy to be a $30-trillion power house by 2047, when the country will be celebrating 100 years of independence.
Indian macros are in good shape, Kotak said, lauding that the country has also been able to take advantage of evolving geopolitics by getting cheap crude from Russia.
"I would like us to pursue the Indian dream of a $30 trillion economy and unshackle the financial sector in a nuanced manner towards optimum regulation," Kotak said.
