Mumbai: The promoter of Bank of Rajasthan Ltd (BoR), P.K Tayal, who owns a 28% stake, on Monday said the lender had approached the banking regulator to replace its chief executive and managing director G. Padmanabhan.
Padmanabhan was appointed by the Reserve Bank of India (RBI) in November to improve corporate governance at the bank, whose proposed qualified institutional placement (QIP) will reduce the promoter’s stake to around 20%.
“We have already conveyed to RBI that we would like to appoint an independent director as the managing director and chief executive officer,” Tayal said.
RBI has ordered two major audits of the bank. KPMG conducted a forensic audit in 2009 and now RBI has appointed Deloitte Haskins and Sells to audit the lending policy while Deloitte Touche Tohmatsu has been hired to audit the information security system.
Tayal blamed Padmanabhan for the losses. In the third quarter of the current fiscal, Bank of Rajasthan posted a net loss of Rs44.70 crore.
Padmanabhan said he has been appointed by RBI for two years with a mandate to fine-tune corporate governance practices at the bank. “It has had some issues and that’s why I am here. It is not normal for RBI to appoint an MD and CEO,” he said.
“My mandate was to address corporate governance issues, give regulatory comfort and remodel the business strategy by focusing more on retail business,” he added.
“There is no corporate governance problem. How can there be a problem if the bank is growing?” asked Tayal. “But now corporate governance has been shaken up with this managing director coming in.”
RBI on 25 February penalized Bank of Rajasthan Rs25 lakh for a series of violations of norms such as “irregularities in the conduct of accounts of a corporate group” and “failure to provide certain documents sought” by the regulator.
“The bank is strong, the books of accounts of the bank are all clean and the promoters are clean,” Tayal maintained. “The special audit is a technology audit and not an audit of the books of the bank.”
Padmanabhan said the bank needs capital to grow and it has proposed to raise Rs250 crore through QIP. This capital infusion will dilute Tayal’s holding to around 20%. The bank has received RBI approval for this.
But Tayal is not happy with the new managing director.
According to Tayal, in July 2009, the bank’s board decided to give an extension to P.L. Ahuja, then managing director and chief executive with RBI approval, but after he retired on 18 November, “immediately RBI appointed Padmanabhan.”
RBI has appointed two new independent directors as well.
“The dominant shareholder group had given a road map for diluting its stake in the bank but has not implemented it,” Padmanabhan said.
But Tayal said the central bank should give him time up to 2013.
“We have already reduced the holding from 44% to 28%. We had given the road map to RBI to reduce our holdings to 10% by 2013,” he said.