Small banks struggle to find CEOs

MUMBAI: Small banks are finding it tough to appoint new CEOs. They need an executive who can lead a digital transformation but paying such candidates top-tier salaries is a challenge for some small lenders. Even if they have the financial muscle, they still have to adhere to salary and banking experience constraints set by RBI.
North East Small Finance Bank, which recently merged with fintech firm Slice, is struggling to appoint a CEO. The bank is in an urgent need of a chief executive as it navigates this transformative phase.
Kerala-based Dhanlaxmi Bank is grappling with succession uncertainty as the term of its current MD & CEO J K Shivan ends next month. The bank has been searching for candidates to pass the baton.
Equitas Small Finance Bank’s founder P N Vasudevan accepted the board’s request to continue leading the company after he resigned in 2022 due to an unsuccessful search for a new chief executive. The board then terminated the more-than-a-year-long CEO hunt.

Many old-generation private and small finance banks are smaller than large NBFCs and financial constraints prevent them from offering top-tier salaries necessary to attract candidates with an in-depth understanding of the evolving economic landscape.

With larger banks using digital services and apps to poach deposit accounts, smaller banks need leaders with versatile skills to steer transformation and develop strategies for digital services. At the same time, smaller banks CEOs need the leadership skills to manage organisations with a significant number of unionised personnel efficiently.

The candidate needs to have sufficient years of service left and be willing to work for a lower salary than larger peers due to RBI guidelines that discourage disproportionate salaries in relation to profits. RBI’s reluctance to approve candidates without banking experience further complicates the appointment process.

In the case of the larger commercial banks, however, there are no dearth of candidates. Ashok Vaswani, Kotak Mahindra Bank‘s RBI-approved CEO-designate, is a global banker formerly with Citibank and Barclays, is set to take charge next week. However, larger banks sometimes face the challenge of getting candidates that meet the approval of both the bank’s board and the regulator.