Mumbai: Axis Bank Ltd said on Monday that its long-time Chief Executive Shikha Sharma will step down at the end of 2018, days after the Reserve Bank of India (RBI) was reported to have expressed concerns about the lender giving her a three-year extension.
The country’s banking sector has been facing increased scrutiny amid record-high bad loan levels within the banking system, the discovery of a $2 billion scam at state-run Punjab National Bank and a slew of other issues.
The Axis Bank board has accepted her request for a shorter seven-month term (from 1 June to 31 December, 2018), subject to the approval of the Reserve Bank of India (RBI), the bank said in a regulatory filing. Last July, Axis said it had re-appointed Sharma as CEO for a three-year period starting 1 June, 2018. Sharma would be completing her third term as MD and CEO of Axis Bank on 31 May.
In a surprise regulatory filing late on Monday, Axis said Sharma, who has been the CEO of the third-biggest private sector Indian bank by assets since 2009, had asked the bank’s board to shorten her next term that is set to begin on 1 June.
“In this connection kindly note that Smt Shikha Sharma, Managing Director & CEO of the Bank has requested the Board to reconsider the period of her re-appointment as the Managing Director and CEO of the Bank to be revised from June 1, 2018 up to December 31, 2018,” the bank said.
The filing did not elaborate why Sharma wanted her fourth term to be curtailed to seven months from three years.
Recent reports in the media have said the Reserve Bank of India had asked the bank’s board to reconsider Sharma’s three-year reappointment citing concerns over the bank’s asset quality among other reasons.
Axis Bank gave no reason for Sharma cutting short her term and a bank spokesman declined to comment when asked if the decision was connected with the recent media reports. Sharma herself made no comment in the regulatory filing.
The private sector lender’s NPAs jumped by over five-fold in recent financial years. The gross NPAs worth Rs4,110 crore at the end of March 2015 surged to Rs 21,280 crore at the end of March 2017. During the same period, the net profit halved from Rs 7,357.8 crore to Rs 3,679.2 crore.
Saswata Guha, a financial sector analyst at Fitch Ratings, said Sharma’s decision to seek a shortening of her term was not “entirely unexpected” given the media reports on the RBI move.
“There is eight-nine months time for a smooth handover, so from an operational perspective, the chances of disruption seem to be low,” Guha said, adding the bank has a capable second-and-third order management line. He added that the rating agency would closely watch any future mismatch between Axis’s reported bad loan numbers and the RBI’s audit.
Axis Bank shares closed 3.8 percent higher in Mumbai trading before the news.