Chandra Shekhar Ghosh's exit may delay Bandhan Bank's recovery: Analysts

The resignation of Chandra Shekhar Ghosh from the Managing Director & Chief Executive Officer (MD & CEO) position of Bandhan Bank is considered a negative surprise for the lender, which was looking at a sustainable recovery in the financial year 2025, according to analysts.

According to analysts at ICICI Securities, Ghosh, who has been the founder and instrumental in the overall functioning of the lender, and therefore, his resignation could significantly alter the business growth and profitability of the bank.

On April 5, 2024, Ghosh tendered his resignation. “After leading the Bank for almost a decade, including three consecutive tenures as MD and CEO, I feel that the time has now come for me to assume a larger strategic role at Bandhan group level. Hence, I have decided to retire from the services of Bandhan Bank at the end of my current tenure as MD and CEO, i.e. on July 9, 2024,” Ghosh said in his letter.

The resignation comes even after the board of Bandhan Bank had approved the re-appointment of Ghosh as MD & CEO for three years in November 2023.

Ghosh’s resignation comes at a time when the National Credit Guarantee Trustee Company (NCGTC) is conducting an audit of the loan claims filed by Bandhan Bank under CGFMU, which is yet to be concluded.

Furthermore, the asset quality woes which started during the Covid pandemic continue to persist for the lender. The bank had started to show some signs of recovery in its business with its plans to diversify away from the microfinance segment along with pursuing geographical diversification. Analysts believe that Ghosh’s resignation could potentially risk the recovery of the business, considering his involvement and experience in the microfinance (MFI) business.

“Mr. Ghosh’s sudden resignation at this crucial juncture could usher in business/management uncertainty and potentially delay, if not derail, the bank’s recovery story, unless he is replaced by a credible candidate,” Emkay Global said in a note.

The Kolkata-based lender has inducted several senior management officials in the recent past, hence fairly new to the bank.

Analysts at Motilal Oswal said, “We remain watchful of the management transition and the bank's execution capability as it focuses on continued diversification of the loan book while improvement in asset quality is expected to drive earnings.”

The bank appointed Rajeev Mantri as the new Chief Financial Officer (CFO) in February 2024. Besides, the two Executive Directors (ED) Rajinder Kumar Babbar received approval from the Reserve Bank of India (RBI) in January 2024, whereas Ratan Kumar Kesh received RBI approval for the role of ED in March 2023.

Since the new CFO has been hired recently, analysts expect the bank to look for an external candidate as the new CEO, which is likely to be a lengthy process leading to disruptions.

“Given the incumbent ED being relatively inexperienced, we believe the Bank may look for an external candidate to fill in its permanent MD & CEO position,” Emkay said.