 "Raising capital may be priority for incoming Dhanlaxmi Bank's CEO")
Ajith Kumar KK, whose appointment was approved by the Reserve Bank of India (RBI) as managing director (MD) and chief executive officer (CEO) of Dhanlaxmi Bank last week, will be the fifth person to head the bank in the last nine years.
According to bank sources, one of the top priorities of Kumar will be to raise capital.
Kumar will replace JK Shivan, who completed his three-year term in January 2024. RBI had asked Shivan to continue as MD & CEO till a new person takes charge.
Shivan’s predecessor Sunil Gurbaxani, who took charge in February 2020, had to resign after shareholders voted him out.
Gurbaxami’s predecessor T Latha, who was appointed in July 2018, quit in October 2019, citing personal reasons.
Latha was appointed following the retirement of G Sreeram.
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Kumar is currently working for Federal Bank.
While the RBI has approved Kumar’s appointment for three years, it is not yet clear when he will take charge of the Thrissur-based lender.
Kumar has over 36 years of experience and currently is the chief human resources officer at Federal Bank.
He has worked in areas like credit, business and branch banking.
Kumar is set to raise capital as the lender’s capital adequacy is at 12.37 per cent. Of this, teir-1 capital stood at 10.75 per cent as on December-end of 2023.
According to RBI norms, a bank of the size of Dhanlaxmi needs to maintain a minimum 11.5 per cent capital adequacy ratio.
In March, the bank’s board approved a rights issue to raise Rs 300 crore.
According to sources, the bank came out of the prompt corrective action framework in 2019 but there was a cap on employee expenses.
Though the bank has applied to the regulator to remove the cap, the RBI insisted that first the bank must raise capital before it can happen.
“So it’s all about raising capital, and as quickly as possible,” said a source. The bank’s cost-to-income ratio is also high at 77.67 per cent.
The bank was able to improve its asset quality with gross non-performing asset (gross NPA) coming down to 4.81 per cent by the end of Q3 FY24 from 5.83 per cent a year ago.
Similarly, net NPA ratio also fell to 1.27 per cent from 1.81 per cent.
The bank’s provision coverage ratio is at a healthy 74.63 per cent, without technical write-offs.
Gross advances were at Rs 10,314 crore as on December 31, 2023, growing by 11.58 per cent year-on-year (Y-o-Y).
Retail loans are around 75 per cent of the loan book. Total deposits of the bank were at Rs 14,340 crore on December-end. It has grown 10.83 per cent Y-o-Y.