Both MD & ED of Karnataka Bank resign late Sunday, ending speculations

Time of India

2 days ago

Karnataka Bank
managing director
Srikrishnan Hari Hara Sarma
and executive director
Sekhar Rao
have stepped down from their respective positions after a month-and-a-half of the auditors of the bank raising red flags about some expenses incurred by them going beyond their delegated powers and which were not approved by the board.
Both Srikrishnan and Rao cited personal reasons for their abrupt resignations. The bank announced it late Sunday evening in regulatory filings to stock exchanges, bringing to an end of the speculation that both of them would be quitting before June 30.
The board of the private sector lender has accepted both the resignations. The bank has formed a search committee to identify candidates for both the top positions.
For the time being, the bank has appointed Raghavendra Srinivas Bhat as the chief operating officer who will assume charge on July 2 to run the show.
"Additionally, substitute arrangements are also being made subject to the regulator's approval," the bank said.
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Srikrishnan's
resignation
will be effective from July 15, while Rao's decision will come into force on July 31. Srikrishnan said he would like to relocate back to Mumbai in his resignation letter while Rao cited his inability to relocate to Mangaluru and other personal reasons.
Announcing the development, the bank stated that the issues raised by the auditors in the notes to accounts contained in the audited financial statements for FY25 "has been discussed and amicably resolved".
"The bank continues to take necessary steps to ensure operational stability and assures various stakeholders that it is well capitalised and continues to be sound as hitherto," it said.
The auditors, Ravi Rajan & Co LLP and RGN Price & Co, stated in their report that the bank had incurred Rs 1.16 crore for hiring consultants and Rs 37 lakh under revenue and capital expenditure "which were incurred beyond the delegated powers of the whole-time directors and was not ratified by the board".
"Consequently, the said amount is recoverable from the concerned directors. However, no effect has been given in the accounts in respect of the recoverable amount. Our opinion is not modified in respect of this matter," they wrote on May 14 in the report on the audit of the consolidated financial results.
The issue raised serious concerns on the
corporate governance
standards in the bank. It has also highlighted the friction brewed between the whole-time directors and other members of the board.
"It's a very simple matter. The amounts are very insignificant, but it's just the governance part, the bank had to take this into account, Srikrihnan said on May 21 responding to questions raised by analysts on the matter.
"If there is anything which is incurred beyond the delegated authority, obviously there are explanations and making sure that those are either ratified or we will have to kind of make sure that the bank has a very conclusive part related to that, so that has been done and which is why it is a simple matter which is an emphasis of matter, which is normal and the amounts are not at all large," the MD had said.