MC Exclusive | RBI junks Dhanlaxmi Bank proposal for Rajagopalan Nair as part-time chairman

Dhanlaxmi Bank

The Reserve Bank of India (RBI) has rejected the Dhanlaxmi Bank proposal to appoint G Rajagopalan Nair as its part-time chairman.

The bank’s nomination and remuneration committee (NRC) and the board had in February cleared Nair’s name for the post. The proposal was subsequently sent to the banking regulator for clearance.

“The RBI has rejected the recommendation,” a person familiar with the development said on condition of anonymity due to the sensitivity of the matter.

Separate emails sent to the RBI and Dhanlaxmi Bank seeking comments for the story remained unanswered till the time of filing this copy.

Nair has been on the board of Dhanlaxmi Bank since August 2020 as an independent director. According to the information on Dhanlaxmi Bank’s website, Nair retired from Federal Bank as general manager-information technology and has an experience of 21 years in the banking industry in banking-related IT and fintech companies.

Chairman's post vacant since December 2021

The Kerala-based bank doesn’t have a chairman since the resignation of G Subramonia Iyer in December 2021. He had resigned citing certain urgent and emergent domestic and personal reasons for resignation.

Iyer was appointed as part-time chairman in February 2021. His predecessor Sajeev Krishnan, too, had resigned in June 2020, citing personal reasons. That apart, there have been several senior-level exits from the Dhanlaxmi Bank’s board over the last few years. Following Krishnan’s resignation, two more board members - KN Murali, Independent Director and G Venkatanarayanan, Additional Director - had submitted resignations.

While personal reasons have been cited, major differences between some shareholders and them have been cited as a cause, according to insiders.

Dhanlaxmi Bank has 10 members on the board, including Managing Director and CEO Shivan JK and RBI-appointed Additional Directors DK Kashyap and Jayakumar Yarasi. Other directors include CK Gopinathan, KN Madhusoodanan, Sreesankar Radhakrishnan, Nirmala Padmanabhan, Sridhar Kalyanasundaram and Vardhini Kalyanaraman.

Improving financials

While there have been exits at the top, Dhanlaxmi Bank has seen an improvement in its financial situation ever since the bank came out of the RBI’s Prompt Corrective Action (PCA) framework in February 2019. The bank's bad loan levels and capital ratios have improved above the regulatory minimum. The lender is in the process of raising funds through a rights issue.

On May 22, Dhanlaxmi Bank reported a jump in net profit at Rs 38.2 crore for the fourth quarter ended March 31, 2023, as against a net profit of Rs 23 crore a year ago.

The gross non-performing assets (GNPAs) stood at 5.19 percent in the March quarter against 5.83 percent in the December quarter. Net NPAs came at an all-time low of 1.16 percent as against 1.82 percent on-quarter, the Thrissur-based bank said in a regulatory filing.

In absolute terms, GNPAs stood at Rs 511.14 crore as against Rs 539.11 crore on-quarter, whereas net NPAs fell to Rs 109.20 crore as against Rs 161.08 crore on-quarter.

The bank has a provision coverage ratio of 90.61 percent and a capital adequacy ratio of 12.32 percent.

Net interest income (NII), which is the difference between the interest income a bank earns from its lending activities and the interest it pays to depositors, climbed 19.5 percent to Rs 115.2 crore from 96.4 percent last fiscal.