Competition for managers is forcing ICICI Bank Ltd., India’s second-largest lender, to consider preventing defecting executives from joining rivals within six months of leaving, said a person with knowledge of the matter.
The requirement for so-called gardening leave would apply to about 120 employees at the level of joint general manager or above, the person said, declining to be identified because the deliberations are private. ICICI has about 53,000 workers.
ICICI, led by Chief Executive Officer Chanda Kochhar, is bracing for more competition for talent as India’s central bank prepares to issue new bank licenses for the first time in more than seven years. Religare Enterprises Ltd., controlled by billionaire brothers Malvinder and Shivinder Mohan Singh, said in August it may apply for a permit.
Mumbai-based ICICI currently has a provision that bars employees from decamping for competing financial institutions within six months without the bank’s permission, though that rule has never been implemented, the person said. The provision was introduced for employees who joined the firm after 2000.
Senior bankers who leave ICICI are barred from luring other workers for the first year, the person said. ICICI spokesman Charudatta Deshpande declined to comment.
ICICI will give senior executives who depart the option of paying the bank an unspecified amount of money to avoid having to serve the gardening leave, the person said.
ICICI’s shares, which have risen 30 percent this year, fell 1.6 percent to 1,139.70 rupees yesterday in Mumbai.
The rate of employee turnover among junior staff has almost doubled this year to about 15 percent as an expanding economy bolsters job prospects, the person said. ICICI’s board will review the plan to introduce gardening leave at a meeting later this month, according to the person.
Gardening leave, a period between jobs when an employee can’t work for a rival, isn’t as common among local private sector banks as overseas banks in India, said R. Suresh, managing director of the Indian unit of Stanton Chase International, an executive search firm.
“If ICICI Bank has come out with it, then everyone else will follow,” he said. “Employees may resent as the next employer won’t wait for six months.” Mutual funds, microfinance and other financial firms offer new opportunities as well, according to him.
V. Vaidyanathan, who was CEO of ICICI Prudential Life Insurance, quit in July to join Future Capital Holdings Ltd. Sonjoy Chatterjee, an executive director at ICICI Bank, departed in April to join Goldman Sachs Group Inc. as a managing director and co-CEO for India.
Billionaire Uday Kotak’s Kotak Mahindra Bank Ltd. became India’s first new commercial bank in more than seven years in 2003, and was the first Indian company to turn into a commercial lender. Mumbai-based Yes Bank Ltd. was allowed to begin operations the following year.
The Reserve Bank of India is now mulling additional banking licenses to spur competition in a market where state-owned lenders account for 70 percent of total assets. State Bank of India is the country’s largest lender with $323 billion of assets as of March 31.