Dhanlaxmi Bank independent director quits citing multiple issues
Sridhar Kalyanasundaram, an independent director at Dhanlaxmi Bank, based in Kerala, tendered his resignation on September 16, citing various concerns related to the bank’s operations and internal disputes within the board. This development was communicated by the bank to stock exchanges on September 17.
In his resignation letter addressed to the Board of Directors, Kalyanasundaram raised several issues. These included the lack of support from the board, problems related to a rights issue plan, issues regarding capital enhancement plans, concerns about the conduct of the bank’s board, questions of probity, and a lack of consensus on various whistleblower issues that had been raised with the directors. Additionally, he cited concerns about what he described as unethical conduct in the bank’s business operations.
Kalyanasundaram’s resignation letter also expressed frustration with instances where his input had been deliberately disregarded or overruled by other board members, seemingly to align with the approach of the Managing Director and CEO, who, as per Kalyanasundaram, had publicly expressed limited concern for shareholders and directors in vernacular press reports.
This resignation highlights internal challenges and differences within the bank’s leadership, which could impact its governance and decision-making processes.
Sridhar Kalyanasundaram further highlighted concerns about the bank’s governance and the working environment in his resignation letter. He noted that he was not the only director who had faced challenges for not aligning with the Managing Director and CEO’s directives, stating that many others had also left, resulting in a board composition that did not conform to the legal requirements.
Dhanlaxmi Bank’s board comprises 10 members, including two additional directors appointed by the Reserve Bank of India (RBI). The bank has faced a series of top-level resignations and operational issues in recent years, which have drawn attention to governance and management concerns.
Kalyanasundaram’s mention of the one-time settlement (OTS) process raises questions about the bank’s approach to resolving non-performing asset (NPA) issues. His assertion suggests that the bank may have been using the OTS process inappropriately, even in cases where it did not have a meaningful impact on the bank’s NPA position. This raises concerns about the bank’s handling of its loan portfolio and the effectiveness of its efforts to manage bad loans.
Sridhar Kalyanasundaram cited a specific example related to the one-time settlement (OTS) process in his resignation letter, which he found concerning. He referred to the case of Jalan Hotels in Kolkata, where the OTS was used to release a guarantor, even after the original debtor had been cleared by a consortium of banks and lenders. Dhanlaxmi Bank held a Registered Charge against the property provided as collateral by the guarantor.
Kalyanasundaram indicated that despite his advice to the board about the significantly discounted offer (Rs 5.25 crores against a reported market value of Rs 35 crores), he was outvoted by a margin of 6 to 1. Surprisingly, even one of the additional directors appointed by regulatory authorities supported the proposal presented to the board.
In his resignation letter, Kalyanasundaram also expressed concern about the lack of action regarding numerous complaints against certain board members, suggesting a broader governance issue within the bank.
This case illustrates the challenges and disagreements within the board regarding critical decisions such as loan settlements and raises questions about the bank’s adherence to appropriate risk management practices and governance standards.
Sridhar Kalyanasundaram’s resignation letter further highlighted the gravity of the situation within Dhanlaxmi Bank. He noted that some complaints even included allegations of “material suppression of facts by some board members.” He expressed his deep concern over the collective responsibility of the board in failing to rectify such issues and emphasized his unwillingness to be associated with a group that appears to believe that such behavior can be ignored or wished away.
In his concluding remarks, Kalyanasundaram expressed his hope and prayer that the bank would be able to safeguard itself against potential predatory acquisitions that might arise as a consequence of the proposed Rights Issue, especially in light of his decision to exit from the board. This statement underscores his concerns about the bank’s future direction and its ability to navigate complex financial matters and governance challenges.
Kalyanasundaram’s resignation sheds light on a series of issues, including governance disputes and concerns related to the bank’s operations and decision-making processes, all of which warrant attention and resolution to ensure the institution’s stability and long-term success.
