The CEO Hunt: Small banks grapple with the search for top executives

In the rapidly evolving landscape of digital banking, small banks are finding it difficult to appoint new CEOs. The necessity for executives capable of leading a successful digital transformation is evident, but financial constraints, particularly salary limitations set by the Reserve Bank of India (RBI), pose a significant challenge for these smaller institutions.

The North East Small Finance Bank, which recently merged with fintech firm Slice, is currently struggling to fill its CEO position. Dhanlaxmi Bank, headquartered in Kerala, is grappling with succession uncertainty as the term of its current MD & CEO J K Shivan concludes next month. The bank is actively searching for suitable candidates to smoothly pass the leadership baton.

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Equitas Small Finance Bank faced a similar challenge when its founder, P N Vasudevan, resigned in 2022 after an unsuccessful CEO search. The board, unable to secure a replacement, requested Vasudevan to continue leading the company, ultimately terminating the lengthy CEO hunt.

For many old-generation private and small finance banks, financial constraints prevent them from offering competitive salaries required to attract candidates with a profound understanding of the evolving economic landscape.

In an era where larger banks utilize digital services to attract deposit accounts, smaller banks need leaders with versatile skills to steer transformation and formulate strategies for digital services. Simultaneously, CEOs of smaller banks must possess the leadership skills necessary to efficiently manage organizations with a significant number of unionized personnel.

However, finding the right candidate is not only a matter of financial limitations but also aligning with RBI guidelines. Candidates must have sufficient years of service left and be willing to accept a lower salary compared to their counterparts in larger banks. The RBI’s reluctance to approve candidates without prior banking experience further complicates the already challenging appointment process.In contrast, larger commercial banks seem to have a pool of candidates. Few larger banks face the challenge of securing candidates who meet the approval of both the bank’s board and the regulator. Ashok Vaswani, RBI-approved CEO-designate for Kotak Mahindra Bank, a global banker formerly with Citibank and Barclays, is set to assume office next week. with inputs from TOI

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