Private sector lender Axis Bank Ltd on Monday, 9 April, said the board has accepted a request from Chief Executive Officer Shikha Sharma to shorten her reappointment period till the end of December 2018. In July 2017, well ahead of the end of her current term, the board had reappointed Sharma for three years starting 1 June 2018.
Sharma has asked the board to reconsider the term of her reappointment, a statement to the exchanges said. The bank’s board has accepted her request, subject to the approval of the RBI, the statement added.
Sharma was keen to exit when her term ended in June and the board, following discussions, decided on a December exit in the interest of a smooth transition, a senior official familiar with the matter told BloombergQuint. The board will begin the process of finding an appropriate candidate anew, the official added.
According to a second person familiar with the matter, Sharma had expressed a desire to leave last year itself as she was being offered better remuneration in a role outside the bank. However, the board convinced her to stay on, said this person.
Sharma came back to the board recently with a request to leave, following a delay in RBI’s approval of her reappointment. The board finally gave in and asked her to stay till a replacement is found, said this person.
The Background
Last year, Axis Bank had appointed Egon Zehnder as consultant to identify the next CEO, which conducted a preliminary search before the board decided on Sharma’s reappointment.
Sharma’s early re-appointment had come against the backdrop of speculation that she may not stay on to lead the bank beyond her current term, which was due to end in June 2018. By clearing the reappointment, the board was hoping to quell uncertainty about an impending leadership change.
However, the reappointment is yet to be cleared by the Reserve Bank of India. On 1 April, the Economic Times reported that the RBI had sent queries to the board on its decision to reappoint Sharma. In a statement issued to stock exchanges, the bank said that the board forwards its recommendations to the regulator as required and added that the “process is currently in progress.”
“If the regulator doesn’t find her proper to continue as CEO then I don’t know how they can approve her term for six more months,” Hemindra Hazari, an independent banking analyst, told BloombergQuint.
The RBI had a very proper case not to renew her extension. I am amazed that despite all this how can Axis Bank ask for an extension for their CEO.Hemindra Hazari, Independent Banking Analyst
The board has “confused the matter even more”, Anil Singhvi, founder of shareholder advisory firm IiAS, said. “Assuming this is for a smooth transition for a new CEO, I think it would have been wiser for the board at the same breath to announce that this is what we are doing to search for a new CEO once again.”
The second person quoted above said that the board does not expect the RBI to object to a six month reappointment in the interest of a smooth transition.
Axis Bank Under Shikha Sharma
Shikha Sharma took over as the chief of Axis Bank in June 2009 from PJ Nayak, despite some reservations from the outgoing chief who preferred that an internal candidate be promoted to the top job.
Sharma’s tenure has been marked by high growth but also a deterioration in asset quality.
Over the course of her tenure, the bank has seen advances rise from Rs 81,557 crore at the end of the March 2009 quarter to Rs 3.73 lakh crore as of March 2017. The lender has seen its gross bad loans ratio rise to 5.04 percent as of March 2017 compared to 0.96 percent in March 2009, when Sharma took charge.
The bank has also had to contend with operational lapses, such as those which came to light during demonetisation.
During the currency exchange program, the Enforcement Directorate had arrested atleast two Axis Bank managers for alleged illegal conversion of demonetised notes. In December 2016, the bank said that it has temporarily suspended accounts of top bullion dealers to counter concerns around alleged money laundering. On 3 April, the bank disclosed that the RBI has denied its request for a licence for import of bullion for financial year 2018-19.
(This article was originally published in BloombergQuint, and has been republished here with permission)
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