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The Reserve Bank of India (RBI) has taken a significant step by appointing an additional director to the board of Bandhan Bank in response to the private lender’s recent performance struggles, leading to a notable drop in profits. This decision, made under the purview of the Banking Regulation Act, reflects the regulatory authority’s proactive approach to overseeing bank operations and ensuring stability within the financial sector.
According to a report by Reuters, the newly appointed director is Arun Kumar Singh, who currently serves as a chief general manager at the RBI. Singh brings with him a wealth of experience, having spent 36 years in various key roles related to Non-Banking Supervision & Regulation, Financial Inclusion, and Monetary Policy.
The move comes at a crucial time for Bandhan Bank, which has faced challenges resulting in a substantial 93% decrease in profits for the quarter ending March 31. This decline has been attributed to factors such as bad loan write-offs and provisions made for potential non-performing loans, reflecting the broader economic impacts of the ongoing COVID-19 pandemic.
Additionally, Bandhan Bank is undergoing a leadership transition, with Managing Director and CEO Chandra Shekhar Ghosh set to retire on July 9 after a decade in the role. The RBI’s decision to appoint an additional director is seen as part of ensuring a smooth transition and effective management during this period of change.
While specific reasons for the appointment were not officially disclosed by either the RBI or Bandhan Bank, sources cited by Reuters indicate that concerns over the bank’s performance and profitability played a significant role in the decision. The move is viewed as a precautionary measure to address challenges and maintain stability within the institution.
Market reactions to the news were mixed, with Bandhan Bank’s stock initially experiencing a 4.4% decline in early trading on Tuesday. However, losses were later mitigated to 1.4%, suggesting a cautious yet not overly negative sentiment among investors.
The RBI’s proactive stance in appointing additional oversight reflects a broader trend of regulatory vigilance in the banking sector, aiming to uphold financial health and ensure confidence in India’s banking institutions.
Sources By Agencies
