The Reserve Bank of India (RBI) may appoint one more additional director on the Board of Dhanlaxmi Bank in the backdrop of the Board’s strength declining to five from eight even as prominent shareholders are seeking to assert their right to nominate their representatives on the Board.
While the bank posted a robust 344 per cent year-on-year (yoy) jump in the fourth quarter (FY22) net profit at ₹23.42 crore (₹5.28 crore in the year ago period), (₹5.28 crore in the year ago period), the central bank may want to ensure that its functioning is on an even keel by possibly inducting an additional director, according to sources.
The 95-year old private sector bank reported a marginal (1.29 per cent yoy) decline in FY22 net profit at ₹35.90 crore (₹37.19 crore in FY21).
RBI already has two additional directors — DK Kashyap and Jayakumar Yarasi — on the board of the Thrissur headquartered private sector bank.
The central bank has powers to appoint additional directors to the board of a bank under Section 36AB of the Banking Regulation Act, 1949.
Depleted board strength could constrain the functioning of various committees of the bank’s board, sources said.
Banks have various committees of the board relating to audit, risk management, nomination and remuneration, non-performing assets, monitoring large value fraud, customer service, among others.
The Bank’s board has seen two exits in the last six months or so.
Suseela Menon R, Independent Director, resigned from the Dhanlaxmi Bank Board on May 1, 2022, citing personal reasons and her professional commitments.
For certain urgent and emergent domestic and personal reasons, G Subramonia Iyer resigned as Part-Time Chairman and Independent Director of the Bank on December 2, 2021.
PK Vijayakumar’s term as an Independent Director ended on September 13, 2021.
Usually, private sector bank boards have 9 to 12 directors with expertise in various fields, including accountancy, agriculture and rural economy, banking, law, small-scale industry, information technology, payment and settlement systems, human resources, and risk management, among others.
The aforementioned developments come even as the Bank’s Board has approved the augmentation of paid up capital by the issue of equity shares on a rights basis for an aggregate amount up to ₹130 crore (including premium) to the eligible shareholders of the Bank.
For the rights issue to be successful, it has to have buy-in from the existing shareholders.
Non-Resident Indians (NRI) hold a 19.11 per cent stake in the bank. The big NRI shareholders include B Ravindran Pillai (10 per cent stake) and Yussuffali Musliam Veetil Abdul Kader (5 per cent).
Individuals having share capital in excess of ₹2 lakhs own 35.62 per cent of the bank. Such shareholders include Gopinathan CK (7.50 per cent) and Kapilkumar Wadhawan (5 per cent).
Banking expert V Viswanathan emphasised that: “It is not in the interests of the bank that the board and the management are on one side and some of the shareholders are on the other side. The RBI needs to take decisive action to ensure the smooth functioning of the bank.”