The banking union calls for the intervention of the RBI in the situation of the Dhanlaxmi bank
Banking union AIBEA has urged RBI Governor Shaktikanta Das to intervene in the affairs of Dhanlaxmi Bank, which it says is “headed in the wrong direction.”
In a letter to the governor of the RBI, the All India Bank Employees’ Association (AIBEA) said the bank is looking to change its business profile, expand its network in northern India and hire senior executives. on a contractual basis at a high remuneration, which could lead him to problems.
The bank returned to profit two years ago after recording losses for five years, AIBEA noted in the letter.
A few years ago, especially around 2008 to 2012, this bank was facing a number of performance problems and was making losses. He made losses of over Rs 850 crore during this period, AIBEA said in the letter to Das.
In the name of modernization of the bank, the management of the time of the bank brought it into serious trouble and virtual mess.
With the intervention of the RBI, the change of management, the strengthening of its capital base, the integration of some well-known people into the bank’s board of directors, among others, helped it to effect a turnaround and now the bank has become a beneficiary, said AIBEA secretary general CH Venkatachalam. noted.
After recording losses continuously for five years, the bank makes profits for the last two years and continuously for eight quarters. The profit for 2019-2020 at Rs 65 crore, is the highest since the bank’s inception nine decades ago, AIBEA said.
“At the start of this year, senior management has changed and in recent months we are concerned that the bank may be headed in the wrong direction once again.
“If the Reserve Bank of India does not intervene effectively in the affairs of this bank now, once again the bank will run into problems,” said AIBEA.
The banking union said that instead of consolidating the gains and further strengthening the bank, it observes that efforts are underway to change the profile of the company, which is sure to put the bank in difficulty.
The 93-year-old Thrissur-based Dhanlaxmi Bank is a small-scale private bank and in the following years it has grown its presence in other states as well.
“Many branches have been opened before in the northern states of India and the bank has encountered problems due to inadequate control and supervision. As a result, the situation has arisen, including the opinion of the RBI, and these decisions had to be reconsidered and the bank has already closed many of these branches.
“But we are learning that attempts are again being made to open more branches in the northern states,” the banking union said.
Dhanlaxmi Bank customers have regained their trust in the bank and any turnaround from the same would be “suicidal,” AIBEA said, urging RBI’s “role on the bank’s board things go wrong” .
In addition, the cost-to-income ratio of the bank is already high and it is imperative and necessary to significantly improve the ratio, he added.
AIBEA also said it learned of the bank’s efforts to appoint large numbers of salespeople and senior executives on a contract basis and at the cost to the company at much higher compensation, which would spell disaster for the bank. and a financial burden.
“We are concerned that the bank cannot bear and afford at this point. In view of these elements, we request your personal and urgent intervention in the affairs of the bank to ensure that the bank does not face any bad weather again.” , AIBEA said in the letter.
(Only the title and image of this report may have been reworked by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)