The Reserve Bank of India appointed an outsider with little experience in India to lead Kotak Mahindra Bank Ltd., surprising analysts and senior management and sending the company's stock down. In a rare move for an Indian lender, Kotak appointed Ashok Vaswani as CEO from outside the company's ranks. According to people familiar with the situation, some senior managers were shocked and disappointed because investment banker K.V.S Manian was seen as the front-runner. Both names were submitted for consideration by the bank's board, and Vaswani was chosen by the Reserve Bank of India, which approves all senior bank appointments.

Kotak shares dropped as much as 2.7%. Monday, partly because senior executives were expecting Manian to replace billionaire founder and former CEO Uday Kotak, who stepped down last month, were concerned about the move. On October 25, the stock recovered some of its losses.

"We need to see how he fits into the Indian banking environment and whether there are any senior management exits or internal flux," wrote Suresh Ganapathy, Macquarie Capital's head of financial services research.

Vaswani, whom Kotak refers to as a "global Indian," has worked for Barclays Plc in the United Kingdom and Citigroup Inc. in Asia-Pacific. Vaswani, a former president of Pagaya Technologies Ltd., a US-Israeli artificial intelligence fintech firm, will join Kotak on January 1.

While some analysts were surprised by the move, Bloomberg News reported in July that India's central bank had been urging the bank to hire someone outside the company to replace Kotak. According to people familiar with the situation, who asked not to be identified because they were discussing private matters with a newcomer in charge, the founder will be unable to unduly influence management decisions. Kotak remains on the board of directors and is the bank's largest shareholder.