RBI advises Dhanlaxmi Bank to ensure transparency in the appointment of directors
The Reserve Bank of India (RBI) advised Dhanlaxmi Bank in June to ensure transparency in the appointment process for directors and to follow best practices in corporate governance. The regulator also asked the bank to speed up and complete the process for appointing directors.
The lender currently has only 5 directors, up from a maximum strength of 11. It also has two RBI candidates for the board as additional directors. Dhanlaxmi does not have a chartered accountant on board as an administrator after the end of the term of the former chartered accountant-director on September 30, 2020.
The board of directors has left pending the recommendations of the bank’s nomination and remuneration committee, including the reappointment of prominent investor Ravi Pillai.
As a result, five people, including two former directors and Ravi Pillai, applied under section 160 of the Companies Act. It was rejected by the board of directors and was not submitted to the annual general meeting for consideration.
According to sources familiar with the board’s deliberations, there is a concerted attempt by some board members to delay the appointment of directors.
“It’s a truncated board and they want to keep it that way to have a controlling stake. It helps them make unilateral decisions against shareholder interests, corporate governance, company law, Sebi LODR and even RBI circulars, ”the sources added.
A board member, however, told FE that the RBI wants to ensure that independent directors are truly independent and qualified.
“All the candidates for the board of directors were brought in by the shareholders. RBI has two directors on board and wants to make sure all recommendations are reviewed properly. No one on the board of directors is against the candidacy of Ravi Pillai. It has only been postponed for now, ”sources said.
The Kerala High Court on Wednesday ordered Dhanlaxmi Bank to refrain from concluding the annual general meeting scheduled for Wednesday, September 29. The High Court Single Bench issued an interim order directing the bank to adjourn the AGM until one day after dealing with the matters on the meeting’s agenda.