RBI approves appointment of Ajith Kumar KK as Dhanlaxmi Bank’s MD & CEO

  • The leadership change at Dhanlaxmi Bank coincides with preparations to launch a 300 crore rights issue, which was approved by its board in March this year.

Gopika Gopakumar, Shivangini
First Published19 Apr 2024
Dhanlaxmi Bank has seen many senior management exits due to ongoing conflicts between board members and shareholders.
Dhanlaxmi Bank has seen many senior management exits due to ongoing conflicts between board members and shareholders.

The Reserve Bank of India (RBI) has approved the appointment of Ajith Kumar KK as the managing director and chief executive officer of Dhanlaxmi Bank.

In a notification to the exchanges on Friday, the bank said that its board of directors will soon convene a meeting to approve Kumar's appointment, and seek shareholder permission thereafter, as per regulatory provisions.

Kumar is set to succeed J.K. Shivan, whose term was set to end on 29 January 2024. Earlier in January, the RBI had approved Dhanlaxmi Bank's request to extend Shivan's tenure until a successor was in place. 

Also Read | RBI imposes fine on Dhanlaxmi Bank, ESAF Small Finance Bank, Punjab and Sind Bank over non-compliances

The leadership change at Dhanlaxmi Bank coincides with preparations to launch a 300 crore rights issue, which was approved by its board in March this year. The capital raise has been long-planned but encountered delays due to board-level disagreements. Eventually, the RBI issued an ultimatum to urgently raise capital as the bank's capital position was inadequate.

As of the end of December 2023, the bank’s Capital Adequacy Ratio (CAR) stood at 12.37%, just above the regulatory minimum of 11.5%. However, this level may not suffice to meet stress test requirements, leading to a cautious approach in lending activities in the recent quarter. Consequently, gross advances saw a minimal increase of just 3 crore.

According to a person familiar with the situation, one significant challenge the bank faces is hiring restrictions imposed by the RBI. These were enacted to maintain the cost-to-income ratio after the bank emerged from prompt corrective action (PCA) in 2019. 

"Employees are either retiring or leaving. So keeping the staff is the biggest challenge. RBI has allowed fresh hiring only after the bank shows improvement in cost to income ratio, which stands at 77.67%," said the person.

Dhanlaxmi Bank has seen many senior management exits due to ongoing conflicts between board members and shareholders. After the contentious removal of former chief executive officer (CEO) Sunil Gurbaxani in September 2020, Shivan, formerly of State Bank of India, was appointed CEO in January 2021.

During Shivan's three-year tenure, Dhanlaxmi Bank improved its asset quality and achieved greater stability in top management. Additionally, legal disputes concerning the appointment of directors were resolved, and new board members were appointed during this period.

Also Read | Dhanlaxmi Bank's independent director quits citing attitude of MD & CEO, multiple other issues

Ajith Kumar, bringing over 36 years of experience from Federal Bank, has held senior roles in credit, human resources, business operations, and branch banking. He currently serves as the chief human resources officer at Federal Bank, according to the filing.

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