The RBI is understood to have hinted that Sunil Gurbaxani should continue as a caretaker CEO but the board is not in favour of this suggestion.
Dhanlaxmi Bank’s board has recommended to the Reserve Bank of India (RBI) to form a three-member committee of Directors (CoD) to run the daily operations of the bank. The three member committee consists of G Subramonia Iyer (Chairman), G Rajagopalan Nair and P K Vijayakumar.
This is after the newly appointed Managing Director and CEO Sunil Gurbaxani was voted out by shareholders at the annual general meeting on 30 September.
“The Board has decided up on a three member CoD to take charge of the operations and has recommended the names to RBI,” said a person close to the development. He declined to be named. The RBI is understood to have hinted that Gurbaxani should continue as a caretaker CEO but the Board is not in favour of this suggestion.
At the AGM, over 90 percent of the votes were polled against Gurbaxani’s appointment. Major shareholders of the bank were unhappy with Gurbaxani’s favourable approach to investors from the “North Indian lobby”. These shareholders feared that the bank would lose its Kerala identity and, hence, wanted to oust Gurbaxani from the bank and bring in a more ‘fit and proper’ candidate.
Gurbaxani assumed office as CEO in February 2020. A veteran banker, he has 35 years of experience with the State Bank of Bikaner & Jaipur (now State Bank of India), and Axis Bank.
Last week, after similar events at Lakshmi Vilas Bank, the RBI had appointed a three member committee of directors to take care of daily operations. Shareholders had rejected appointments of seven directors including the CEO in LVB along with that of statutory auditors.
On Wednesday, after the AGM results came out, Gurbaxani told Moneycontrol in an exclusive chat that he will wait for RBI’s direction before submitting the resignation.
“I have not resigned. I will wait for RBI’s direction on the matter,” said Gurbaxani in an exclusive chat with Moneycontrol. Asked what the rules say in such a situation, Gurbaxani said that the Banking Regulation Act could supersede company law and the regulator can make a decision.
“Looking at the matter or the governance issues that are impacting the bank for years together, the regulator may take a decision which it feels appropriate,” Gurbaxani said, adding the RBI had not communicated anything to him on the matter so far.
Gurbaxani said the decision of the shareholders voting against him surprised him the most, adding that while he respects that decision, he would ultimately be driven by RBI's decision.
“There are reasons that I would not disclose at this point of time. At times you do pay the price for being absolutely honest, candid and not allowing any sign of misgovernance,” Gurbaxani said. On September 29, Moneycontrol first reported that a section of Dhanlaxmi Bank shareholders could vote against the CEO.
According to persons familiar with the development, major shareholders of the bank were unhappy with Gurbaxani’s favourable approach to investors from the “north Indian lobby”. These shareholders, hence, wanted to oust Gurbaxani from the bank and bring in a more "fit and proper" candidate.
Gurbaxani assumed office as CEO in February 2020. The veteran banker has 35 years of experience with the State Bank of Bikaner & Jaipur (now State Bank of India) and Axis Bank.
On Tuesday, the RBI appointed D K Kashyap, General Manager, Reserve Bank of India, Bengaluru Regional Office as Additional Director on the Board of the Bank for a period of two years. The RBI now has two members on Dhanlaxmi bank’s Board.
Unions pitch for a better CEO candidate
In a second letter to RBI this week, bank employee union, AIBEA asked RBI to appoint a better candidate to head Dhanlaxmi Bank.“We strongly suggest and fervently hope that while appointing a new Managing Director and CEO, the RBI would keep the entire background and context in view,” said the AIBEA General Secretary C H Venkatachalam in the letter. “The new MD & CEO would be someone who is familiar with this Bank, its customers, its Depositors, its shareholders and its nine decades of existence,” Venkatachalam said.