UTI Bank board spat started over LIC nominee induction

The spat among UTI Bank board members started three months ago on the issue of inducting an LIC nominee. The bank board protested against admitting the LIC nominee, R B L Vaish, on the contention that it would go against corporate governance practices under Clause 49 of the listing agreement following amendment made the Securities & Exchange Board of India's (Sebi).

The revised listing norms mandates that 50 per cent of the board should comprise of independent directors.

"With the change in the law, institutional directors are not considered as being independent," said LIC chairman R N Bhardwaj.

The board of UTI Bank today has three vacancies, one of which would be that of LIC nominee.

Bank officials said that Vaish's appointment to the board will be considered in the next board meeting to be held in January. The meeting to be held on Wednesday will only discuss the aspect of reversing the former decision to spilt the post of chairman and managing director, added officials.

The present UTI Bank board has eight members with J R Varma, N C Singhal, Yash Mahajan and Surendra Singh as independent directors and A T Pannir Selvam (former Union Bank of India chairman and managing director) and Ajeet Prasad (UTI I nominee) and M Raghavendra (GIC nominee) and P J Nayak (chairman and managing director UTI Bank).

In the recent bank board meeting held last Tuesday, the proposal to induct LIC nominee was discussed, and when there was no consensus on the issue, it was put to vote.

LIC holds 13 per cent stake in the bank, but has no representation on the board since Bhardwaj resigned in October, in line with the Reserve Bank of India directive. As per the central bank, a director cannot hold directorship in a company and a bank at the same time, as this could result in a conflict of interest.

"Initially I resigned from the board of a couple of companies, but then thought it best to resign from the bank board itself," said Bhardwaj.

The conflict between UTI Bank and its parent, UTI I started months back when Nayak suggested the induction of two independent directors "" R H Patil, former managing director National Stock Exchange, and Gurcharan Das, former chairman Procter & Gamble, India "" to fill the vacancies on the board. This followed erstwhile CDC, now called Actis, having sold part of its stake to HSBC, and thereby its two directors stepped down from the board.

The induction of Das would have given the private sector bank a retail push. However, the major shareholders, UTI I, are understood not to have favoured the proposal.