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Bank union seeks RBI intervention into state of affairs at Dhanlaxmi Bank

Bank union AIBEA has urged RBI governor Shaktikanta Das to intervene into the affairs of Dhanlaxmi Bank which it alleged is "heading into wrong direction".

Bank union seeks RBI intervention into state of affairs at Dhanlaxmi Bank

Press Trust of India New Delhi
Bank union AIBEA has urged RBI governor Shaktikanta Das to intervene into the affairs of Dhanlaxmi Bank which it alleged is "heading into wrong direction".
The All India Bank Employees' Association (AIBEA) in a letter to the RBI governor has claimed that the bank is looking to change its business profile, expand network in northern India and hire senior people on contractual basis at high remuneration which could land it into problems.
The bank returned to profits two years ago after posting losses for five years, the AIBEA noted in the letter.
Few years ago, particularly around 2008 to 2012, this bank was facing a lot of problems regarding its performance and was making losses. It made losses of more than Rs 850 crore during that period, the AIBEA said in the letter to Das.
In the name of modernising the bank, the then top management of the bank brought it to serious problems and virtual mess.
With the intervention of the RBI, change in top management, strengthening its capital base, inducting some reputed people on the board of directors of the bank among others helped it make a turnaround and now the bank has come into profit, AIBEA General Secretary C H Venkatachalam said.
After making losses for continuously for five years the bank is making profit for last two years and continuously for eight quarters. The profit for 2019-20 at Rs 65 crore, is the highest since the bank's inception nine decades ago, the AIBEA mentioned.
"In the beginning of this year, the top management has changed and in the recent months we are concerned to observe that perhaps the bank once again heading in the wrong direction.
"If Reserve Bank of India does not effectively intervene in the affairs of this bank now, once again the bank will run into problems," the AIBEA claimed.
The bank union said that instead of consolidating the gains and further strengthening the bank, it is observing that efforts are on to change the business profile which are bound to land the bank into difficulties.
The 93-year old Thrissur-based Dhanlaxmi Bank is a small-sized private bank and in later years, it grew presence in other states also.
"A lot of branches were earlier opened in north Indian states and the bank got into problems due to inadequate control and supervision. Hence, the situation arose, including in the view of the RBI, and these decisions had to be reviewed and bank has already close many of those branches.
"But we learn that attempts are again being made to open more branches in northern states," said the bank union.
Customers of Dhanlaxmi Bank have regained their confidence on the bank and any reversal of the same would be "suicidal", AIBEA said, urging the that "RBI's role in the board of directors of the bank should be reviewed as otherwise RBI would become answerable if things go bad".
Besides, the cost to income ratio of the bank is already high and there is imperative need and necessity to improve the ratio substantially, it added.
AIBEA said it has also learnt about efforts at the bank to appoint large number of sales and senior executive on contractual and cost to company basis at much higher remuneration which will land the bank in a catastrophe and financial burden.
"We apprehend the bank cannot bear and afford at this juncture. In view of the these, we seek your personal and urgent intervention in the affairs of the bank to ensure that the bank once again does not face any bad weather," AIBEA said in the letter.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Sep 26 2020 | 11:30 PM IST

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