Amitabh Chaturvedi, managing director and chief executive of Dhanlaxmi Bank, has called it a day, three years after he took charge of the old-generation private sector lender, due to serious disagreement with other board members over the functioning and management of the bank’s operations.
Chaturvedi confirmed the development. “We had differences of opinion. So, the best way is to move out,” he told Business Standard over phone.
The bank’s board on Monday met in Mumbai and accepted his resignation. P G Jayakumar, the executive director of the bank, will replace Chaturvedi and be based in Thrissur.
Industry sources say Chaturvedi’s exit may prompt a few more top officials to leave.
Sources said Chaturvedi had fallen out of favour with the board, as the members were not convinced by the future business strategy presented by the management.
Liquidity was a key issue with the bank, as it had a high reliance on short-term liquidity, which was used to support its credit expansion.
High dependence on short-term liquidity could lead to asset liability mismatches. However, the bank has more government securities than required by norms. Those could be used to tide over the liquidity crunch.
The cost-income ratio was also spoiled by the bank’s aggressive branch expansion and recruitment in the last two years. It opened about 100 branches and added 1,800 staffers over the past two years.
Sources said the bank was expected to post a net loss of around Rs 30 core for the quarter ended December 31. In the second quarter, the bank’s profit rose to Rs 4.35 crore, from Rs 1.62 crore in the comparable period the previous year. The Thrissur-based lender would announce its third quarter earnings on February 14.
“There were differences over how the bank should be run and the future strategies. Chaturvedi and other board members were not on the same page. This was the main reason for his exit,” said a source familiar with the development.
The Reserve Bank of India (RBI) was not comfortable with the exponential growth that the bank had experienced after Chaturvedi took charge. It had asked the management to explain several decisions taken by it. The central bank has intensified its scrutiny of the bank’s accounts in the past one month, after fears of eroding profitability and liquidity mismanagement gained credence.
Also, the board was not pleased with the open conflict between the top management of Dhanlaxmi Bank and a section of its employee union. The All India Bank Officers’ Confederation (AIBOC) had accused the bank of window dressing its accounts to show inflated profits. The bank’s management had dismissed these allegations and claimed it was a motivated attempt to de-recognise the bank’s performance.
Later, the management called for truce and met all the demands made by the unions on issues like bonus, increments, pension, and trade union rights. However, bankers felt the union issue could have been handled in a better manner.
“Chaturvedi tried to change the systems and processes which resulted in the public dispute. It neither helped the bank nor him,” said a top official of another South India-based private bank.
Chaturvedi had taken charge of Dhanlaxmi Bank after a stint with ICICI Bank and Reliance Capital. He put the bank on a fast track, growing its business at a break-neck speed. His appointment also triggered similar high-profile appointments on the boards of other old-generation private banks, including Federal Bank, Lakshmi Vilas Bank, DCB Bank and Ratnakar Bank.
Despite its reservations on the bank’s functioning, RBI had cleared the proposal to extend Chaturvedi’s term for another three years, till October 2014.
Chaturvedi is said to have tried to turn Dhanlaxmi Bank into a pan-Indian bank from a regional player. The bank reported a staggering 229 per cent growth in advances between December 2008 and June 2011 and diversified its portfolio with a special focus on retail clients.