Kotak Mahindra Bank MD Uday Kotak gets one-year extension on IL&FS board
The government appointed Kotak to head the lender's board, which will help the troubled company come out of difficulties, after the state took over the board.
October 01, 2019 / 10:13 PM IST
The government on October 1 extended the tenure of Uday Kotak on the board of bankrupt NBFC Infrastructure Leasing & Financial Services (IL&FS). The extension has been given for another year, with effect from October 3.
Under the Banking Regulation Act, 1949, a bank cannot be managed by a person who is a director of any other company. It can, however, be given a temporary exception for three or nine months if so recommended by the Reserve Bank of India.
Accordingly, Kotak was given a go-ahead for three months initially, which was followed up with a nine-month relaxation that ends on October 2.
After the government took over IL&FS' board, it appointed Uday Kotak to head it and help the troubled company come out of difficulties.
The statutes will "not apply to Kotak Mahindra Bank in so far as it relates to its Managing Director and Chief Executive Officer Uday Kotak being on Board of Infrastructure Leasing and Financial Services Limited as its Non-executive Director for a period up to the 2nd October, 2020", a gazette notification from the Government said.
The notification was issued by the Department of Financial Services in the Ministry of Finance on October 1 and was signed by Joint Secretary Amit Agrawal.
Terming it as a "historic development", a source told news agency PTI that this is the first time RBI is giving the government a go-ahead to give an extension to a bank CEO, allowing him to continue as chairman of another financial institution.
The Uday Kotak-led board found that over 250 companies were a part of the overall IL&FS group, which has an outstanding of over Rs 94,000 crore to lenders. In addition to this, over 90 percent of the flagship company's assets are classified as dud.
The board is trying to keep the company as a going concern by focusing on asset sales and has appointed a resolution professional to steer the way.(With inputs from PTI)