Not often does a good deal maker end up running one of the best banks in the country. More so, we don’t have many successful instances of a non-bank metamorphosing into a bank, which grew to scale, thanks to what still remains one of the largest M&A deals in the financial services sector. The point in case is Kotak Mahindra Bank, promoted by Uday Kotak, a turnaround specialist who is known to make some unpredictable moves.

True to his style, a few weeks ago, the bank announced the decision taken by its board to appoint Kotak as the non-executive non-independent director. This is after his term as the MD & CEO of the bank would conclude in December. The board’s decision has sparked numerous debates. Having built a formidable institution, why stay around in a different capacity? Is the spirit of the law is being sidelined and so on. But here’s the thing.

India Inc and its promoters helming the top post for decades isn’t anything new. Sunil Mittal of Bharti Airtel; the Bajaj brother and their respective auto and financial services businesses; Munjals and the Hero Group – the list is long. While these are promoter-led companies, their functioning is very much like investors-led companies. So, why should things be different for banks? Just that a few years ago the RBI brought in restrictions on the tenures of the board members, including the MD & CEO. The objective was to institutionalise banks – to bifurcate a person from the system and ensure the system can function very well with or without the person.

The other thing unique about Uday Kotak is his ability to don multiple professional hats, and yet be completely hands on about his bank like the promoters of any business. The recent example is his three-year-long stint as the chairman of IL&FS. By offering his appointment to the board after December, Kotak won’t be technically step-side the regulations. But how will the RBI perceive it?

Aditya Puri, the longest standing Indian bank chief credited for building HDFC Bank from the scratch, and Romesh Sobti, the man behind landing IndusInd Bank to its current position, attempted a similar move. But the RBI summarily rejected the proposition. Once gone, stay away was the messaging from the regulator. How will it decide on Kotak? If the bank’s request is turned down, will it embroil into another legal battle? Or considering that the board’s proposal is not in volition of law, if the RBI decides favourably, floodgates are sure to open, given that in the next 2-3 years there will a lot of churn in the top management, especially at promoter-led banks. Yet again, we are at a juncture where Kotak could set precedence, something the RBI is cautiously guarded.