Mumbai: The Reserve Bank of India (RBI) has rejected the nomination of former State Bank of India (SBI) chief general manager B.S. Bhasin as the next managing director and chief executive officer (CEO) of the Asset Reconstruction Company (India) Ltd (Arcil), according to two persons familiar with the development.
Both requested anonymity as their information is based on a private communication between RBI and Arcil.
Arcil chairman Abhijit Datta declined comment for this story.
RBI is not comfortable with the idea of both the chairman and CEO of Arcil coming from the same bank.
Datta, Arcil’s chairman, is a retired deputy managing director and group executive, mid-corporate group of SBI.
RBI’s rejection of Bhasin’s appointment as the CEO comes months after an inspection report of the Indian central bank accused Arcil’s main shareholders of influencing the company’s management to help them clean their own books by buying their bad assets.
Banks sell bad loans to asset reconstruction companies in exchange for cash or security receipts.
A report by The Economic Times on 18 July said RBI had pointed out a string of accounting and transaction irregularities in Arcil, including inflated earnings.
RBI’s criticism forced the company to restate its profits for fiscal 2010-11 and also shelve dividend payments to shareholders.
Arcil has now restated its net profit for 2010-11 to Rs3.3 crore, from Rs51 crore previously approved by the Arcil board on 3 May.
So far, Arcil has acquired stressed assets with principal value of around Rs24,000 crore from various banks, of which the highest—Rs9,000 crore—is from the second largest lender by value, ICICI Bank Ltd.
SBI, the nation’s largest lender, is one of the four sponsor banks of Arcil, besides IDBI Bank Ltd, ICICI Bank and Punjab National Bank.
SBI is the largest shareholder in the company holding 19.95% of the total equity, followed by IDBI (19.18%). ICICI Bank holds 13.26%, while Punjab National Bank holds a 10.01% stake in the company.
In January Arcil had set up a search committee to look for a successor to its former CEO and managing director S. Khasnobis who retired on 12 July.
The three-member search committee was headed by Pradip Shah, former managing director at rating agency Crisil Ltd.
“The search committee submitted its report to the chairman, who suggested the name of Bhasin,” said a board member.
Bhasin was selected ahead of S.S. Dabas, a general manager of Punjab National Bank.
Neeta Mukherjee is currently acting CEO at Arcil.