Karnataka Bank likely to elevate new COO Raghavendra Bhat as interim CEO

MANGALURU | July 10, 2025 – In a key leadership development, Karnataka Bank is likely to appoint Raghavendra Bhat, the recently inducted Chief Operating Officer (COO), as the interim Managing Director and CEO. The move comes as the private sector lender navigates an executive vacuum following the completion of Mahabaleshwara M.S.’s extended term in April 2024.

According to sources familiar with the matter, Bhat’s name has been proposed internally and is pending regulatory approval from the Reserve Bank of India (RBI). The appointment, if confirmed, would bring temporary stability to the bank’s top leadership and offer continuity in its ongoing transformation agenda.

Leadership Void Since April 2024

Karnataka Bank has been functioning without a full-time CEO for nearly three months since the extended tenure of Mahabaleshwara M.S. ended. The absence of a permanent head raised concerns over strategic continuity and decision-making agility, particularly as the bank pushes ahead with digital upgrades, operational restructuring, and profitability improvement measures.

Raghavendra Bhat was appointed COO only recently, in June 2024, bringing with him over three decades of banking experience. Prior to joining Karnataka Bank, he held senior leadership roles at Canara Bank, including General Manager and Circle Head.

“He is seen as a stabilizing presence with deep operational expertise and a good grasp of regulatory dynamics. Elevating him even in an interim capacity sends the right signal to markets and employees alike,” said a senior industry official who declined to be named.

RBI Nod Crucial for Interim Appointment

As per RBI norms, banks require prior approval for the appointment of MD & CEO, whether permanent or interim. The board of Karnataka Bank has reportedly submitted its recommendation to the regulator. While the timeline for regulatory response is not fixed, sources expect a decision within the next few weeks.

“Given Bhat’s track record and his recent induction as COO, his elevation as interim CEO is a pragmatic choice until a long-term successor is finalized,” noted Rajeev Mehta, Senior Banking Analyst at Institutional Equities Research.

Strategic Continuity a Priority

Karnataka Bank is currently in the middle of executing its KBL NxT transformation program, aimed at repositioning the century-old bank as a modern, tech-driven institution. This includes enhancements in digital banking, adoption of cloud-based infrastructure, and boosting the CASA (current and savings account) franchise.

Analysts believe that leadership stability is crucial to keeping the transformation on track. "Even an interim CEO can provide strategic clarity if aligned with the board’s vision. What’s important now is to avoid inertia," said Nidhi Shah, Director at Axis Insights.

Stock Market Reaction Muted but Watchful

Shares of Karnataka Bank remained largely flat in Wednesday’s session, reflecting a wait-and-watch stance by investors. The stock closed at ₹198.25 on the NSE, marginally up by 0.4%.

Traders noted that while the news was not officially confirmed, investor sentiment could shift once the appointment receives regulatory approval.

"The market is not spooked, which shows that Bhat is a credible candidate. However, the overhang of a temporary leadership situation still lingers," said Abhishek Sharma, banking sector strategist at Pinnacle Securities.

Outlook: Investors Seek Clarity on Long-Term CEO Search

While the appointment of Bhat may offer short-term stability, investors and stakeholders will remain keen on the selection of a permanent CEO. The board has yet to indicate whether a wider search is underway or if internal candidates are being considered.

Karnataka Bank reported a net profit of ₹321 crore in Q4 FY25, up 18% year-on-year, driven by lower provisioning and steady growth in retail lending. The bank’s gross NPA ratio improved to 3.7%, signaling asset quality recovery.

“With a better balance sheet and ambitious digital plans, Karnataka Bank is at an inflection point. What it needs now is assertive leadership and long-term vision,” Shah added.

The potential appointment of Raghavendra Bhat as interim CEO could mark a period of much-needed stability for Karnataka Bank as it navigates a crucial transformation phase. While the final nod from RBI is awaited, Bhat’s background and operational acumen make him a likely fit for steering the bank through this transitional period.

Until a permanent CEO is named, stakeholders will closely monitor Bhat’s leadership approach and the bank's strategic direction, particularly with respect to technology investments, credit growth, and governance standards.