The Reserve Bank of India (RBI) may prefer a public sector banker as a replacement for IndusInd Bank’s current chief Sumant Kathpalia, according to industry sources.

RBI recently gave its approval for Kathpalia’s re-appointment as MD & CEO only for a year (from March 24, 2025 till March 23, 2026) despite the Bank’s Board seeking a three year term.

The private sector bank has been in the eye of a storm due to disclosure of an estimated impact of about ₹1,500 crore to its balance sheet due to discrepancies in the accounting of derivatives portfolio, a shorter tenure approved by the regulator to the CEO, and concerns around asset quality of the microfinance portfolio.

Even as the RBI approved re-appointment of Kathpalia as MD & CEO for a shorter term, the Central bank is believed to have asked the board to propose three-four names for the top position.

Industry sources say it is unlikely that an internal candidate will find favour with RBI, going by the trend in appointments in private sector banks over the last few years.

Further, they noted that the Central bank is believed to be examining insider trading data in the case of IIB over the last few years.

Currently, six private sector banks are headed by those who held senior/top positions in public sector banks.

The six banks are

YES Bank (Prashant Kumar, former Deputy Managing Director/DMD, SBI), Karur Vysya Bank (B Ramesh Babu, former DMD, SBI), RBL (R Subramaniakumar, MD & CEO, Indian Overseas Bank), Tamilnad Mercantile Bank (Salee Sukumaran Nair, former DMD, SBI), Jammu and kashmir Bank (Amitava Chatterjee, former DMD, SBI), Bandhan Bank (Partha Pratim Sengupta, former DMD, SBI and MD & CEO, Indian Overseas Bank) and Ujjivan Small Finance Bank (Sanjeev Nautiyal, former DMD, SBI).

The aforementioned appointments probably indicate the comfort that the Central bank has in the leadership abilities of senior and top public sector bankers to steer the private sector banks.