RBI's upper age limit of 70 for private bank CEOs may not be good news for everyone

Many say the move to set an upper age limit for the chiefs of private banks ensures continuity of leadership, which will benefit banks

Somasroy Chakraborty & M Saraswathy  |  Kolkata/Mumbai December 29, 2014 Last Updated at 00:02 IST 

The Reserve Bank of India (RBI)’s decision to allow the heads of private banks to hold office till they attain the age of 70 might not be good news for all. While the move has erased doubts on the eligibility of HDFC Bank Managing Director Aditya Puri and IndusInd Bank Managing Director and Chief Executive Officer Romesh Sobti for re-appointments, the wait for the top job will be extended for many senior bankers.

 RBI had announced the upper age limit for private bank chiefs on September 9, HDFC Bank had named Paresh Sukthankar as deputy managing director, while IndusInd Bank had short-listed a few from within the bank as Sobti’s successor. Though no such limit was specified for private bank chiefs till then, it was widely believed the central bank wasn’t in favour of appointing those aged more than 65. Both Puri and Sobti will turn 65 next year.

Experts say despite a proposed increase in the number of banks, it might not be difficult for most private lenders to retain senior executives. “Most
 private banks in India are still going through a strong growth phase and expanding horizontally in the BFSI (banking, financial services and insurance) space, creating room for professionals to grow in the larger ecosystem of their subsidiaries,” said Shashwat Sharma, partner (management consulting) at KPMG in India.

According to human resource (HR) consultants, assigning new roles to senior management executives helps. “A new position such as that of deputy chief executive or chief strategy officer can be a good tool to retain officials in the rank just below the chief executive’s post. This has been experimented by banks abroad to give a greater sense of belonging to an employee in the company, especially those who have worked at the organisation for more than a decade,” said a Mumbai-based HR consultant specialising in financial services.

Analysts say not many bankers will be tempted to leave big brands and build a new bank from scratch. “While new types of banks are coming up, creating opportunities for some of these individuals, an immediate job switch might not be viable in all cases,” said Sunil Goel, director of HR firm GlobalHunt. Some of these bankers sought greater responsibilities, rather than higher remuneration, which their existing jobs might offer because of growth in business, he added.

Many say the move to set an upper age limit for the chiefs of private banks ensures continuity of leadership, which will benefit banks. “In banking, decision-making is often judgement-based. Good judgement comes with experience. Some chief executives have demonstrated their leadership skills in growing their banks successfully. If they continue, the institutions will benefit,” said Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services.