RBI seen behind early exit of Axis Bank, ICICI Bank CEOs
10 Apr 2018
The poster woment of Indian financial sector — Shikha Sharma, MD and CEO of Axis Bank, and Chanda Kochhar, MD and CEO of ICICI bank – have ignominious exits after an exciting run as heads of two powerful private sector banks.
Shikha Sharma will see her three-year term at Axis Bank cut short by seven months to December 2018, following her request, ostensibly following a Reserve Bank of India directive to the bank’s board to reconsider her three-year term.
Sharma’s early exit from Axis bank comes after an over 2,000-per cent jump in the bank’s gross non-performing assets from Rs1,173 crore at end of December 2009 to Rs25,001 crore as of December 2017.
“Shikha Sharma, MD & CEO of the bank has requested the board to reconsider the period of her re-appointment as the MD & CEO of the bank be revised from June 1, 2018 up to December 31, 2018,” Axis Bank said in a statement to the exchanges.
“The board has accepted her said request, subject to the approval of the RBI.”
Meanwhile, the term of Chanda Kochhar, her counterpart at ICICI Bank who is now facing allegations of conflict of interest in ICICI Bank extending loans to the Videocon group, will end in June 2018.
The RBI has listed several reasons, including soaring non-performing assets with the bank reporting a divergence of Rs5,633 crore in the second quarter of 2017-18 and Rs4,867 crore in FY 2016-17 in bad loans for not supporting the board’s recommendation to grant a fourth term for Sharma.
The gross NPA additions at Axis Bank for third-quarter of FY 2018 stood at Rs4,428 crore, down from Rs8,936 crore reported in second-quarter of FY 2018. The corporate slippages stood at Rs2,980 crore and 93 per cent of it came from low-rated BB and below accounts. The bank’s total income declined to Rs14,314.63 crore during the December quarter.
In 2017, the bank’s board initiated a process to select a new MD and CEO and hired executive search firm Egon Zehnder. Though some potential candidates were shortlisted, the board did not find them good enough to be appointed as MD and CEO and then plumped for Shikha Sharma in the backdrop of reports of her moving out and also of a merger with another bank.
Reports quoting finance ministry sources said it is for RBI as the regulator to look into the affairs of private lender ICICI Bank and decide if Kochhar should continue to be the CEO and managing director of the bank. The ICICO board may also take a decision on continuation of the incumbent CEO as the allegations of nepotism against Kochhar have put a question mark on the bank's corporate governance.