Dhanlaxmi Bank, based in Kerala, is yet again in the headlines, as its independent director, Sridhar Kalyanasundaram, stepped down on September 16th. His resignation, officially communicated to exchanges on September 17th, sheds light on various operational issues and internal disagreements within the bank’s board.
Tumult Within the Board
In his official letter of resignation addressed to the bank’s directors, Kalyanasundaram underscored several concerns. These include the board’s unsupportive attitude, matters related to capital enhancement and rights issues plans, alleged unethical conduct of business, and differences over the handling of ‘whistle-blower’ cases.
Highlighting the challenges he faced during his tenure, Kalyanasundaram stated, “Many a time, my suggestions were deliberately sidelined or rejected by board members, often aligning with the confrontational stance of the MD & CEO.” He further mentioned the MD & CEO’s public disregard for shareholders and directors.
He is not the sole director to have faced such challenges, Kalyanasundaram revealed, alluding to previous directors who departed because of similar disagreements.
Operational Concerns and Missteps
Elaborating on the bank’s problematic operations, Kalyanasundaram drew attention to the bank’s use of one-time settlement processes, even in cases where it didn’t influence the bank’s NPA position. He cited the Jalan Hotels of Kolkata case, critiquing the board’s decision to accept a significantly lower offer compared to the property’s market value, a decision he vocally opposed.
Kalyanasundaram also highlighted unaddressed complaints against several board members, some of which include accusations of hiding crucial information. “The collective inability of the Board to rectify these matters cannot be ignored,” he stated.
Kalyanasundaram’s Hope for the Bank’s Future
In concluding his letter, Kalyanasundaram expressed his hope that the bank could steer clear of potential hostile takeovers, especially if the proposed Rights Issue proceeds post his departure.
Board Dynamics and Past Resignations
Currently, Dhanlaxmi Bank’s board comprises ten members, which includes two additional directors nominated by the Reserve Bank of India. The bank has experienced a series of high-profile resignations in the past few years, highlighting deeper operational and governance challenges.
To add to the bank’s leadership void, it hasn’t had a permanent chairman since G Subramonia Iyer’s resignation in December 2021, who cited personal reasons. His predecessor, Sajeev Krishnan, also resigned in June 2020 on similar grounds.
Moreover, several other senior executives have parted ways with Dhanlaxmi Bank’s board over recent years. Notably, the bank’s attempt to appoint G Rajagopalan Nair as its part-time chairman was rejected by the RBI earlier this year.
The unfolding events at Dhanlaxmi Bank underscore the pressing need for transparent governance and effective leadership in the banking sector.
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