The Reserve Bank of India (RBI) has appointed Arun Kumar Singh, a former chief general manager at the central bank, as an additional director on the Board of Kolkata-based Bandhan Bank. This action falls under Section 36AB of the Banking Regulation Act, 1949, allowing RBI to appoint directors to safeguard the interests of the bank and its depositors, particularly in times of regulatory concern.
This move coincides with the impending retirement of Bandhan Bank’s founder and CEO, Chandra Shekhar Ghosh, on July 9. The central bank’s decision not to extend Ghosh’s tenure, despite board approval for a three-year re-appointment, underscores ongoing regulatory scrutiny. Concerns include the Ghosh family’s involvement in other businesses like real estate, amid questions over the bank’s microloan portfolio quality and allegations of loan evergreening.
Bandhan Bank faces an audit by the National Credit Guarantee Trustee Company (NCGTC) regarding its microloan portfolio, totaling Rs 20,800 crore, to investigate alleged irregularities. While the audit nears completion, clarity on the portfolio’s status awaits the audit report submission to the board.
Moreover, the search for a new CEO is progressing cautiously to ensure the appointee is disconnected from past controversies, effectively ruling out internal candidates. Egon Zehnder, the headhunting firm hired for the CEO search, is expected to present a shortlist to the board soon, as the RBI emphasizes a seamless leadership transition amidst ongoing oversight.
In summary, RBI’s appointment of a director to Bandhan Bank’s Board reflects its proactive stance amid concerns over governance and operational issues, aiming to safeguard depositor interests and maintain stability.
