Dhanlaxmi gets RBI's nod on MD recruit, revival in process

Saikat Das
Moneycontrol.com

The Reserve Bank of India (RBI) has confirmed the appointment of P G Jayakumar, the new managing director of the privately held Dhanlaxmi Bank wherein its board had dislodged the existing management due to poor financial performance. This looks to have scorched all speculations of a possible acquisition of the troubled bank by any bigger bank, a source familiar with the development told Moneycontrol.com.

The new MD cum CEO has been working with the bank over 25 years. He belonged to the previous management before the new breed, under the leadership of Amitabh Chaturvedi, had taken over in October, 2008 with a mandate to improve bank's financials.

"RBI has put a seal on the bank board's decision to appoint me as the new MD on May 16. This move is a reflection of confidence on us. We will run the bank towards prosperity. Our bank is not for sell," P G Jayakumar told Moneycontrol.com confirming the development.

Meanwhile, the bank has already submitted a revival package to the RBI in March, 2012. Following the removal of Chaturvedi led administration; the regulator had asked the lender to provide a recovery plan. Cutting of unnecessary expenditure and increase income through safe business bets are the two key components there.

For example, the lender is shifting its entire accounts and finance department from its Mumbai (Lower Parel) office to Thrissur. It is paying huge rent (maybe more than Rs 1 crore a year) for its Mumbai office. Moreover, some free services like sending cheque books to customers irrespective of their requirement would be stopped. The bank will also reduce staff strength to around 3000 from 4200 currently.

"Many senior executives from Chaturvedi's team have already quit. Its current CFO is likely to leave soon. The lender is planning to bring back his predecessor, who had quit at the time of management transition. Now, the new team has a mandate to rectify errors done by the earlier," the source said requesting anonymity.

Out of its total staff strength 1,500 are under the salary structure, designed by Indian Bankers’ Association (IBA) in consonance with industry unions. However, the rest 2,700 get remuneration in the CTC format.  It is learnt that the bank will be offering option to switch from CTC to IBA structure.

The bank is currently raising Rs 200 crore (including Rs 100 crore oversubscription option) through private placement of bonds. The issue will close on May 29. It also plans to raise equity capital through a follow-on offer in Q2, FY13.

"Our bond issue will be subscribed fully. We are precisely working as per our revival plan. In Q2, we will break even. Our bank will start generating profits from Q3 or Q4 in the current financial year," Jayakumar said.

saikat.das@network18online.com