What may have led to Dhanlaxmi Bank CEO's resignation?

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What may have led to Dhanlaxmi Bank CEO's resignation?

Thrissur-based Dhanlaxmi Bank's chief executive officer Amitabh Chaturvedi who had joined the old generation lender in 2008 with a mandate to improve skill sets on Monday put in papers. The bank today is counted among the new generation lenders.

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Saikat Das
Moneycontrol.com

Thrissur-based Dhanlaxmi Bank 's chief executive officer Amitabh Chaturvedi who had joined the old generation lender in 2008 with a mandate to improve skill sets on Monday put in papers. The bank today is counted among the new generation lenders.

Last October, 2011, Chaturvedi had got an extension for another three years till 2014. In the same month, the lender was battling charges of financial irregularities, leveled by the All India Banks' Officers' Confederation (AIBO). The general secretary of the union G N Nadaf launched a tirade against the new management demanding merger of the bank with some public sector bank.

"He wants to pursue some career objectives. Hence, he decided to move on," a spokesperson from the bank told Moneycontrol.com.

According to another senior official, Chaturvedi had differences of opinion with the board of directors. Some directors on the board did not agree with Chaturvedi on his future growth strategy for the bank. There are around eight directors.

The sudden development has raised concerns about the bank among market participants. Dhanlaxmi shares fell nearly 2.5% to close the day at Rs 56 on the NSE. Some banking analysts are of opinion that this resignation might be followed by some more senior level exits. It is learnt that a fortnight back Sandeep Wirkhare, head - retail assets credit and policy quit apparently to pursue his own business initiatives.

Speculations were rife that the South Indian Bank or Federal Bank would acquire this bank. However, the bank later scotched all rumours saying that they on the contrary, would like to acquire any bank at a reasonable price.

Prior to the joining of Dhanlaxmi Bank Chaturvedi had worked with ICICI Bank and Reliance Capital. He was credited with  turning around the ailing private sector bank into a new generation lender. During the July-September quarter, its loan book spurted 44% year-on-year to Rs 10,130 crore. In his tenure, the bank made the highest profit of Rs 22 crore in March quarter, 2009 and the lowest profit of Rs 1.32 crore in December quarter, 2009. Its market capitalization rose from Rs 292 crore in October, 2008 to Rs 479 crore currently. 

Despite persistant denials from both Chaturvedi and Reliance ADAG, the market always suspected that he had been drafted in to prepare the bank for an eventual takeover by Reliance Capital .

"For some reason, he was known as a Reliance man. I have faced many fund managers enquiring about the probable take-over of the bank by the Anil Ambani group," quipped an analyst who tracks the bank.

So, will Chaturvedi's sudden exit lead to any change in the bank's ratings?

"It is a little premature to gauge. We are waiting for some more clarity on the issue," Saswata Guha, associate director (banking), Fitch Ratings told Moneycontrol.com.

"In the last few years, we have been raising concern on their loan book quality. The rapid growth in credit off-take has resulted in significant increase in the share of unseasoned loans to the total advances. This does not represent clear picture on long term asset quality," Guha said.

Unseasoned loans are any fresh credit that is less than one year old. Majority of repayments are yet to be made for unseasoned loans. Hence, it bears higher risk for a bank in case of any default. 

saikat.das@network18online.com