By Venkatachari Jagannathan
Chennai, Oct 1 (IANS) Breaking its silence on the happenings in the Kerala-based Dhanlaxmi Bank, the Reserve Bank of India (RBI) on Thursday approved the formation of a Committee of Directors (CoD) to exercise the powers of Managing Director and CEO as an interim measure.
In a regulatory filing, Dhanlaxmi Bank said, as requested by its Board of Directors, the RBI has approved an interim arrangement for formation of a CoD to exercise the powers of Managing Director and CEO till such time a new person takes charge.
The CoD consists of G. Subramonia Iyer as Chairman, and G. Rajagopalan Nair and P.K. Vijayakumar as Members.
“As advised by the RBI, the interim arrangement will not continue beyond four months, within which the Bank will complete the process of identification and appointment of a new MD and CEO,” Dhanlaxmi Bank said.
Since Wednesday, suspense continued over the next course of action at the Dhanlaxmi Bank, after the shareholders voted out MD and CEO Sunil Gurbaxani at the annual general meeting (AGM), said industry officials.
“The bank has communicated, to the RBI, the shareholders’ decision at the AGM to vote out Gurbaxani. The bank Board has sent to the RBI its decision to form a CoD to manage the day-to-day affairs of the bank till a new Managing Director and CEO is appointed,” a source told IANS.
The bank Board on Wednesday had recommended a three-member CoD. On the other hand, Gurbaxani has not put in his papers after the shareholders voted him out, and was waiting for the RBI’s decision on the issue, saying he was appointed by the Central bank.
However, Gurbaxani chose to be silent when asked to comment by IANS.
Industry experts told IANS that though a bank is governed by both the Companies Act and the Banking Regulation Act, the latter overrides the former in case of any conflict of provisions.
It has to be seen whether the RBI will direct Dhanlaxmi Bank to call another AGM as per the provisions of the Banking Regulation Act. If this happens, the issue of shareholder democracy will also come into play.
There is already a view that the RBI seems to be micro-managing Dhanlaxmi bank by directing it to remove a former Chief General Manager appointed as an adviser.
Gurbaxani was appointed as MD and CEO of the bank for a period of three years from February 27 this year.
In the AGM, the ordinary resolution moved for Gurbaxani’s appointment was defeated with 90.49 per cent of the votes polled against the proposal as per the regulatory filing. Only 9.51 per cent of the votes were polled in favour of his appointment.
Of the 10 resolutions moved at the AGM, the shareholders had passed nine and defeated one.
This is the second private bank where the shareholders have voted against the appointment of the Managing Director and CEO in recent days.
On September 25, the shareholders of Lakshmi Vilas Bank (LVB) had voted out seven directors, including the Managing Director and CEO, in the AGM. However, in the case of LVB, the RBI had asked the Directors to form a CoD on the same day.
The RBI had, on September 28, appointed Dhanlaxmi Bank’s General Manager, Bengaluru Regional Office, D.K. Kashyap as an Additional Director of the bank for a period of two years.
However, in a letter to RBI Governor Shaktikanta Das, All India Bank Employees’ Association’s General Secretary C.H. Venkatachalam said it is hoped the move will strengthen effective monitoring and control by the RBI over the affairs of Dhanlaxmi Bank.
Venkatachalam also suggested to Das, that while appointing a new Managing Director and CEO for the Dhanlaxmi Bank, the RBI should keep the entire background and context in view and select a person who is familiar with the bank, its customers, depositors and shareholders as well as over nine decades of its existence.
(Venkatachari Jagannathan can be contacted at firstname.lastname@example.org)