The Reserve Bank of India (RBI) on Monday capped the tenure of managing directors (MDs) and chief executive officers (CEOs) of private banks at 15 years. Promoters or major shareholders, however, cannot hold these posts for more than 12 years, but the RBI can choose to give them a three-year extension under extraordinary circumstances.
In its draft guidelines issued last year, the central bank had proposed a maximum of 10 years for promoter shareholders as MD and CEO.
According to the RBI’s latest guidelines on corporate governance in banks, after the completion of their term, professional MDs & CEOs or whole-time directors will be eligible for re-appointment in the same bank after a minimum gap of three years. During the cooling-off period, they should not be associated with the bank or its group entities in any capacity, either directly or indirectly.
Banks will need to refund estimated Rs 4,500 crore to borrowers for compound interest charged on loans greater than Rs 2 crore. This follows Reserve Bank of India’s directive to banks to refund compound interest levied during six-months moratorium, according to Kotak Institutional Equities. Banking regulator gave advise to banks to implement Supreme Court order on giving the compound interest relief to loans above Rs 2 crore and lifting of standstill on classifying account as non-performing loan. The estimated impact is assessed for 4QFY21E earnings with a broad-brush assumption of corporate and SME loans as the qualifying amount (above Rs 2 crore) and interest rate of 10 per cent on these loans. For the banks under coverage, this suggests an impact of Rs 45 billion, about 11 per cent of estimated earning for Q4FY21. Banks with higher share of corporate/SME portfolio will face greater impact, the broking house said.
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To comply with the new definition, existing multicap schemed would have had to undergo large-scale churn. “Renaming the fund as Kotak Flexicap Fund, gives an additional flexibility for us to choose between various market capitalisation buckets,” said Harsha Upadhyaya, President & CIO – Equity, Kotak MF Mahindra Asset Management Company, who also manages the fund. The fund house said the scheme “will continue to follow the top-down sectoral approach supplemented by bottom-up stock picks. The fund will also continue to take concentrated sector allocation diversified at a stock level.” Kotak MF has also filed the offer document with Sebi to launch a new multicap scheme.
Read more about Kotak Mahindra Bank Q3 consolidated net up 11% at Rs 2,602 cr on robust NII on Business Standard. Asset quality improves both YoY and sequentially; bank has also granted one-time recast of borrowers under RBI resolution framework, amounting to 0.28 per cent of its net advances