Karnataka Bank shares crack 6% as CEO, ED quit amid differences with board

Over the past year, Karnataka Bank shares have tumbled over 12 percent on the bourses.

Private sector lender Karnataka Bank's stock price tanked six percent on the bourses in early trade on Monday, June 30, after the bank's CEO Srikrishnan Hari Hara Sarma and Executive Director Sekhar Rao stepped down from their positions, citing personal reasons.

On June 29, the bank reported the development in an exchange filing. Srikrishnan Hari Hara Sarma's resignation will be effective from July 15, while Sekhar Rao will leave the bank on July 31.

According to Moneycontrol, 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.

At 9.30 a.m., shares of the bank tanked 5.8 percent to Rs 195.78 on the NSE, compared to the previous session's closing price.

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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.

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