MC EXCLUSIVE Karnataka Bank CEO Sarma steps down due to differences with board

Karnataka Bank CEO Srikrishnan Hari Hara Sarma (Image Courtesy: Karnataka Bank)

Karnataka Bank’s chief executive officer Srikrishnan Hari Hara Sarma is said to have stepped down from his position. The bank’s executive director Sekhar Rao, the senior most official after Sarma, is also expected to step down by July 30.

Differences between Sarma, Rao and the bank’s board on a certain expenditure incurred by the lender is said to have resulted in the chief executive wanting to step down from his position.

An email sent to the bank seeking clarification on the matter remained unanswered till publishing the article. The story will be updated if the bank responds. A WhatsApp text sent to Sarma also remained unanswered.

A person aware of the matter said he continues to hold his position as CEO for now, though it is expected that a formal announcement regarding his resignation may be made in a few days once the board approves his decision and the same is communicated to the Reserve Bank of India.

The differences between the board and CEO and ED is believed to have cropped up in May when the bank’s statutory auditors highlighted in their notes Rs 1.53 crore of expenditure in connection with engaging a consultant and other purposes.

The expenditure incurred is said to have been beyond the powers of the bank’s whole-time directors and was not ratified by the Board. “Consequently, the said amount is recoverable from the concerned directors,” the auditors noted. It is gathered that the consultancy expenses were incurred towards technology improvements and revamping of credit verticals.

The auditors’ comments are said to have invited the regulators attention on this matter. However, a highly placed source aware of the development said steps have been taken to address the issue pointed out in the auditors’ notes to accounts. “Whatever had to be done is done,” he said adding that the regulator is also aware of the action taken by the people involved.

Sarma, a banker with over 40 years of experience, is the first external CEO appointed by Karnataka Bank in May 2023 for a three-year term, following a formal search process that involved headhunters making recommendations to the lender's board.

The previous bank chiefs were long-time employees of the bank.

Sarma, who’s career started with Bank of America, was one of the early employees of HDFC Bank and was also a part of the founding team at Yes Bank. Prior to joining Karnataka Bank, he was the managing director & chief executive of Jio Payments Bank from April 2015 to November 2021.

The bank raised Rs 1,500 crore of capital since Sarma took charge, including Rs 600 crore of qualified institutional placements last year.

Sources say the friction between the management and board is often due to differences in vision.

“Sarma came in with a mandate to grow the bank significantly and was often questioned by the board for some of his operational decisions,” said a banker who didn’t want to be named.

“This is not the first time that the Board of Karnataka Bank and its management have had differences. Even in the past, the former MD & CEO MS Mahabaleshwara’s term was truncated by almost a year owing to such differences,” he added.