Karnataka Bank shares recover after CEO, ED resign; bank reassures clients

Shares of Karnataka Bank fell over 5 per cent on Monday following the resignations of its managing director (MD) & chief executive officer (CEO) and executive director (ED), which was communicated to the exchanges late Sunday evening. Both cited personal reasons for the decisions.

 

In May, the bank’s statutory auditors had flagged certain expenditure incurred by the whole-time directors without taking the board into confidence, which may have led to resignations, sources said.

 

On Monday, the bank sought to reassure customers, stating it remains well-capitalised with a capital adequacy ratio of 19.85 per cent-- reflecting its strong financial position and sound risk management practices.

 

Customers of this old generation community based bank have not reacted to the developments, and the share price recovered from day’s low to close at ₹195.75 a piece.

 

In a statement, the bank said, “…Karnataka Bank would like to reassure all its valued customers and stakeholders that the safety and security of depositors’ money has always been, and will continue to be, our utmost priority. We wish to reiterate that the bank remains strong, resilient, and committed to upholding the trust placed in us over many decades”.

 

“The bank’s fundamentals remain strong, and our commitment to transparency, customer service, and ethical governance remains unwavering,” it further said.

 

The bank has a reasonably strong board, with former State Bank of India managing director P Pradeep Kumar being the non-executive chairman. The board includes Justice AV Chandrashekar, former judge, High Court of Karnataka and former Judicial Member, Karnataka State Administrative Tribunal, and Uma Shankar, former executive director of Reserve Bank of India (RBI), among others.

 

Srikrishnan Hari Hara Sarma, the MD & CEO of the bank, resigned from his position citing personal reasons, including his decision to relocate back to Mumbai.

 

Similarly, ED Sekhar Rao resigned from his position citing his inability to relocate to Mangaluru and other personal reasons.

 

Following the departure of the MD & CEO and ED, the bank has formed a search committee to identify suitable candidates for these positions.

  ALSO READ: NPA reduction over last 5 years driven by write-offs: RBI report

 

A new CEO is expected to be in place in 4-6 months.

 

Additionally, the bank has appointed an experienced senior banker as the chief operating officer (COO) who will assume charge on July 2, and made substitute arrangements, subject to the regulator’s -- Reserve Bank of India (RBI) -- approval.

 

In its fourth quarter of financial year 2025 (Q4FY25) earnings, the auditors of the bank flagged an expenditure of ₹1.16 crore incurred in connection with engaging consultants.

 

It also flagged revenue expenditure and total fixed assets including capital expenditure amounting to ₹37,00,000 incurred beyond the delegated powers of the whole-time directors and was not ratified by the board of the bank.

 

The said amount was supposed to be recovered from the concerned directors, the auditors had said.

 

In FY25, the bank reported a net profit of ₹1,272 crore, compared to ₹1,306 crore. Its advances stood at ₹77,958 crore at the end of FY25 while its deposit stood at ₹1.04 trillion. Its asset quality improved, with gross NPAs at 3.08 per cent, and net NPA at 1.31 per cent.