The surprise appointment of R Subramaniakumar as the managing director and chief executive officer of RBL Bank earlier this month left investors of the private bank flummoxed and the stock subsequently fell over 20 percent.
The bank’s key investors are likely to approve the appointment, which was approved by the Reserve Bank of India, in the interests of stabilising the private lender, people familiar with the matter said. The investors are also said to be seeking a presence on the bank’s board.
While rejection of a bank MD and CEO approved by the regulator is rare and could lead to a management crisis, there has been at least one such instance in the recent past. Shareholders of Thrissur-based Dhanlaxmi Bank ousted MD and CEO Sunil Gurbaxani at its annual general meeting on September 30, 2020.
Over 90 percent of Dhanlaxmi Bank’s shareholders voted against Gurbaxani’s appointment, apparently due to his alleged favouring of investors from north India, which they feared would obscure the bank’s Kerala identity. The decision of the shareholders came as a surprise, Gurbaxani told Moneycontrol in an interview after his ouster.
Large investors in RBL Bank including Baring Asia, CDC and Gaja Capital are keen to nominate one or more members to the board to strengthen the bank’s operations and protect their investments, subject to the Reserve Bank of India’s approval.
The key criteria for a board nominee is a seasoned banker, one person told Moneycontrol.
“RBL Bank’s board needs to be rehabilitated with banking experience. We have reached out to a few candidates. Nomination may be done as and when the present board members’ terms come to an end,” one person said.
“Approval of the new MD and CEO’s appointment is not conditional on the investors getting board nominees,” the people said.
Another person told Moneycontrol the investors would not like to destabilise the bank by objecting to the new MD and CEO. They will look to the new leadership for a growth strategy and the ability to attract good talent.
Moneycontrol did not get any official response to queries sent to RBL Bank, Baring Asia, CDC and Gaja Capital.
Baring Private Equity Asia became the single largest investor in RBL Bank by picking a 9.45 percent stake in August 2020. UK-based CDC and venture capital fund Gaja Capital are the other key investors in the bank.
ChrysCapital had earlier bought a 2.09 percent stake in RBL Bank. CDC and Asian Development Bank were a few of the early investors in the bank.
The private lender informed the stock exchanges on June 11 that the Reserve Bank of India had approved the appointment of Subramaniakumar as MD and CEO for three years. Subramaniakumar is a former MD and CEO of Indian Overseas Bank.
The RBL Bank stock fell 22 percent to Rs 87.90 on the BSE on June 13, the first day of trading after Subramaniakumar’s appointment was announced.
There has been a series of management changes at RBL Bank. On December 25, the RBI appointed its official, communication department head Yogesh Dayal, as a board member of RBL Bank.Soon after the RBI’s announcement, RBL Bank informed the stock exchanges that MD and CEO Vishwavir Ahuja had gone on leave with immediate effect. The bank named executive director Rajeev Ahuja as the interim MD and CEO.