The Reserve Bank of India (RBI) may select the next CEO of Lakshmi Vilas Bank (LVB), from a panel of candidates the lender had provided to the central bank earlier this year.
The list includes one internal candidate, one from Kotak Mahindra Bank and one from Punjab National Bank (PNB), sources said, as per a report by The Economic Times.
“We are given to understand that the regulator may consider the existing list for selecting the next CEO for the bank,” a source told the paper.
CEO S Sunder, at present holds interim charge and was suggested to fill the post fully – a decision that was rejected by shareholders through vote at the AGM last week. They also rejected the re-appointment of six other directors on September 25.
Sunder took charge in January 2020 after Parthasarathi Mukherjee suddenly resigned on August 31, 2019. Prior to this he was the bank’s CFO from April 2018 to December 2019.
The outcome of the AGM (first reported by Moneycontrol) was unprecedented in many ways. It is rare that shareholders oust an RBI-approved CEO in a bank, along with more than half the directors on the board, and the auditors as well for good measure.
As news of the management's ouster hit the headlines, LVB swung into damage control. It sought the central bank’s approval to form a committee of directors (CoD) to take charge with discretionary powers of the managing director and CEO.
The approval came late on September 27. Members of the CoD are Meeta Makhan (Chairman), Shakti Sinha and Satish Kumar Kalra.
LVB has been incurring losses for the past 10 quarters and the RBI initiated Prompt Corrective Action (PCA) in September 2019, which inter alia prescribes the bank to bring in additional capital, restrict further lending to corporates, reduce NPAs, and improve the Provision Coverage Ratio to 70 percent.
The distressed finances require the bank to take effective steps to augment its capital base in 2020-21.
According to the March quarter figures, LVB has a capital adequacy ratio (CAR) — a measure of the financial stability of a lender — of just 1.12 percent as on March 31, as against the RBI requirement of 8 percent. Similarly, the Tier I and II components of CAR stood at a negative 0.88 percent and 2 percent, respectively.
Gross non-performing assets (NPAs), or bad loans, as on March 31, stood at 25.39 percent compared with 23.27 percent a year ago.In the March-quarter results notes, under the head 'material uncertainty related to going concern', the bank’s auditors had outlined the severe financial situation the company is going through and indicated that any chances of survival depend on capital infusion.