(Adds details, background, analyst comment)
By Devidutta Tripathy and Suvashree Choudhury
MUMBAI, April 9 (Reuters) - Axis Bank Ltd said on Monday that its long-time Chief Executive Shikha Sharma will step down at the end of 2018, days after India’s central bank was reported to have expressed concerns about the lender giving her a three-year extension.
India’s banking sector has been facing increased scrutiny amid record-high bad loan levels within the banking system, the discovery of a $2 billion scam at state-run Punjab National Bank and a slew of other issues.
In a surprise regulatory filing late on Monday, Axis said Sharma, who has been the CEO of the third-biggest private sector Indian bank by assets since 2009, had asked the bank’s board to shorten her next term that is set to begin on June 1.
Axis Bank’s board has accepted Sharma’s request, pending approval from India’s central bank, the lender said.
Last July, Axis said it had re-appointed Sharma as CEO for a three-year period starting June 1, 2018.
Recent Indian media reports, including in The Times of India and The Economic Times, have said the Reserve Bank of India had asked the bank’s board to reconsider Sharma’s three-year reappointment citing concerns over the bank’s asset quality among other reasons.
Axis Bank gave no reason for Sharma cutting short her term and a bank spokesman declined to comment when asked if the decision was connected with the recent media reports.
Sharma herself made no comment in the regulatory filing.
Under Sharma, Axis has seen its gross bad loans jump more than six times over the last three years to 250 billion rupees ($3.85 billion) as of end-2017.
Last year, a central bank audit also unearthed 56.33 billion rupees more in bad loans at Axis than it had originally reported for the fiscal year ended March 31, 2017.
Saswata Guha, a financial sector analyst at Fitch Ratings, said Sharma’s decision to seek a shortening of her term was not “entirely unexpected” given the media reports on the RBI move.
“There is eight-nine months time for a smooth handover, so from an operational perspective, the chances of disruption seem to be low,” Guha said, adding the bank has a capable second-and-third order management line.
He added that the rating agency would closely watch any future mismatch between Axis’s reported bad loan numbers and the RBI’s audit.
Axis Bank shares closed 3.8 percent higher in Mumbai trading before the news.
$1 = 64.9500 Indian rupees Reporting by Devidutta Tripathy and Suvashree Dey Choudhury; Editing by Adrian Croft and Euan Rocha