AIBEA calls for RBI intervention to save Dhanlaxmi Bank

The All-India Bank Employees’ Association (AIBEA) has sought the intervention of the Reserve Bank of India in the affairs of Dhanlaxmi Bank as it is worried that the lender may run into problems again.

“We strongly believe that the RBI’s role in the board of directors of the bank should be reviewed, as otherwise the RBI would become answerable if things go bad,” said CH Venkatachalam, General Secretary, AIBEA, in a letter to the RBI Governor Shaktikanta Das.

Expansion plans

Noting that the top management of the Thrissur-based bank has changed in recent months, he said it may be headed once again in the wrong direction, as there are efforts to open more branches and appoint a large number of sales executives and senior executives.

“But we learn that attempts are again being made to open more branches in northern States, while the bank has inadequate infrastructure to manage the business in those areas,” said AIBEA, adding that the bank’s cost-to-income ratio is already high that and there is an imperative need and necessity to improve it substantially.

“We are concerned to learn that efforts are afoot to appoint a large number of sales executives and senior executives on contractual and cost to company basis at a much higher remuneration. This will land the bank in a catastrophe and financial burden which, we apprehend, the bank cannot bear and afford at this juncture,” the AIBEA has warned.

The bank had, in the past, too, opened a large number of branches in north Indian States and it faced problems due to inadequate control and supervision, AIBEA noted, pointing out that the situation then arose, including in the view of the RBI, and these decisions had to be reviewed and many branches were closed.

93-year old Dhanlaxmi Bank is a small-sized private bank. According to AIBEA, it faced a lot of headwinds around 2008 to 2012 in its performance and was making losses.

“In the name of modernising the bank, the then top management of the bank brought the bank to serious problems and virtual mess. The bank made a loss of more than ₹850 crore during that period,” it said, adding that at that time too the RBI had to intervene in its affairs,and subsequently there was a change in its top management, induction of reputed people on its board, and strengthening of its capital base.

AGM on Sept 30

Significantly, the bank is set to hold its annual general meeting on September 30. According to its annual report, it made a net annual profit of ₹65.78 crore in 2019-20 and has 247 branches as on March 31, 2020, spread across 14 States and 1 Union Territory (Chandigarh).

For the quarter ended June 30, the bank reported a net profit of ₹6.09 crore due to higher provisioning against a net profit of ₹19.84 crore a year ago. Its capital adequacy ratio stood at 13.94 per cent as on June 30, 2020, versus 14.41 per cent as on March 31, 2020.

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