In his resignation letter, Kalyanasundaram cited alleged factionalism by board members, unethical business conduct and irregularities by managing director Shivan JK in holding board and committee meetings.
But before this, minority shareholders as well as employees’ organisations had on several occasions in the recent past questioned the bank’s functioning.
“The bank is in a mess. Employees union, management and shareholders all contribute to the problem,” a senior stock market analyst said, requesting anonymity.
In October last year, a group of minority shareholders of the bank, led by West Asia-based billionaire B Ravindran Pillai, who holds 9.99% share in the bank, had tried to suspend the powers of Shivan. The group, however, withdrew the move later.
The same group had also in March last year raised concerns over the bank’s financial health.Differences between the board members and the shareholders have been a perennial problem in Dhanlaxmi. It led to the exit of several key executives in the past. Its former managing director Sunil Gurbaxani was ousted by shareholders in September 2020.The share holding pattern in the bank is well diversified with no identifiable promoter.
“RBI needs to act and stop all this drama, which has been playing out for years, ruining the work culture at the bank,” another person said. “Other Kerala-based and community-based lenders were also witness to such issues. But they have largely overcome this,” he said.
The Dhanlaxmi board has two additional directors nominated by RBI—DK Kashyap and Jayakumar Yarasi.
Interestingly, in his resignation letter to the board, Kalyanasundaram voiced concerns over misuse of the one-time settlement scheme (OTS), which banks employ to settle bad loans. Giving reference to a recent debt settlement with Jalan Hotels of Kolkata, he alleged that the bank used OTS to release a guarantor, even after the original debtor had been cleared by the consortium of other banks.
“Despite my advising the board of the hugely discounted offer (Rs 5.25 crore against a reported market value of Rs 35 crore), I was voted out 6 to 1, and surprisingly even one of the additional directors appointed by the regulators supported the proposal brought to the board,” he said.
A person tracking the development said that it would be interesting to see how the regulator handles this.
Established in 1927, Thrissur-based Dhanlaxmi is one of the small-sized banks in India with total advances of Rs 10,000 crore and total deposits of Rs 13,400 crore as on June 30. Its business is largely concentrated in Kerala, which accounts for about half of its network of 255 branches.
The bank had planned capital raising during the first half of FY23 but it could not happen due to a legal case against the bank, which resulted in non-compliance of board composition as the bank was not able to appoint new board members, ratings company Care Ratings had said in a note last December.