Axis Bank Ltd's chairman and chief executive officer Pangal Jayendra Nayak ended his nine-year association with the bank, resigning in a huff on Monday, three months before his tenure ended, after he was overruled by the board on the appointment of Shika Sharma as its new managing director and chief executive.
Sharma was till Monday the managing director and chief executive of ICICI Prudential Life Insurance. Nayak's opposition to Sharma was reportedly because he felt that she was a career ICICI person and would upset equations at Axis. He favoured an insider for the post, and was backing Hemant Kaul, who heads the Axis Bank's retail operations. However, he was outvoted by the board nine to one, with himself the sole dissenter.
Nayak's track record is beyond question. After taking over as chairman and managing director of UTI Bank Ltd, the precursor of Axis Bank, in January 2000, he transformed what was perceived as a quasi-government bank into the third largest lender among private banks.
Since Nayak took over, Axis Bank's net profit has grown at a compounded annual growth rate of at least 40 per cent. Under him, growth in other key business parameters such as deposits, advances and total assets has also been impressive.
A former bureaucrat, he helped the bank to increasingly shift focus to quality assets, build a strong IT platform, cut costs and expand its network. As a result, Axis Bank's net profit for 2008-09 was up 60 per cent. The bank's NPAs are among the lowest, while its margins are among the best.
However, Nayak also has a reputation in the bank for being headstrong and autocratic. Insiders accuse him of not having done enough to build a second line of leadership. He had offered to resign at least twice earlier, but was persuaded to stay back.
In 2001, he went on leave for a few weeks until a panel cleared him of any role in the aborted merger of UTI Bank with the ailing Global Trust Bank. His decision to rechristen the bank as Axis was a result of his refusal to pay royalty to the Unit Trust of India.
Again in 2007, Nayak submitted his resignation when the Reserve Bank of India ruled that UTI Bank, like other private banks, split the positions of chairman and chief executive. Nayak said he would quit on 31 July of that year – when he turned 60 – rather than accept a truncated role.
That was prevented by the board by passing a resolution recommending Nayak for the post of the bank's executive chairman for a term of two years. Ultimately, RBI accepted the board's recommendation to allow Nayak to hold dual charge for two years, with an understanding that it would be split when he retires in July 2009.
Naik was formerly an IAS officer from the Karnataka cadre. He holds an MA and PhD from Cambridge University. His initiation into the Indian financial sector was in 1996 as an executive trustee of the erstwhile Unit Trust of India. Earlier, he had a stint at the department of economic affairs, ministry of finance, where he was joint secretary in charge of the capital markets division. He worked with the then finance minister Manmohan Singh during the reform years of the early 1990s as joint secretary in the ministry of finance.
He dealt with the capital market and was looking after commercial borrowings during those five years before quitting the civil service. He had good support in the bureaucracy. Nayak used the goodwill to get new government business for the bank, which went a long way in boosting its business in initial years.