RBI appoints director on the board of Bandhan Bank after drop in profits

The Reserve Bank of India (RBI) has appointed an additional director to the board of Bandhan Bank on Monday, according to Reuters.

The RBI, under the Banking Regulation Act, can appoint directors to boards in order to oversee bank operations.

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In a notification issued by Bandhan Bank, the private lender confirmed that Arun Kumar Singh, a chief general manager at the RBI, will act as the additional director of Bandhan Bank for a year, starting June 24.

According to Moneycontrol, Arun Kumar Singh has worked with the RBI for 36 years and managed positions in Non-Banking Supervision & Regulation, Financial Inclusion and Monetary Policy.

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While the RBI and Bandhan Bank did not state any specific reasons for the decision, a source, according to Reuters, pointed towards low performance and a drop in profits, stating that the decision was made to ensure smooth management.

Bandhan Bank will be changing management as Managing Director and CEO Chandra Shekhar Ghosh will retire on July 9 after a decade at this post. The RBI is yet to approve a new CEO in his stead.

The bank has had a drop in profits to the tune of 93 per cent in the three months leading up to March 31. The bank wrote off bad loans and made provisions for potential non performing loans as well.

In January, they disclosed that loans they had given during the COVID-19 pandemic were being investigated by the National Credit Guarantee Trustee Company - a government agency that looks at defaults by small businesses.

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Macquarie analyst Suresh Ganapathy told Reuters while he expects Bandhan's stock to fall in the near-term, the RBI's move "is more of a prudent measure".

Shares of Bandhan Bank fell 4.4 per cent in early trade on Tuesday, but reduced its losses down to 1.4 per cent, according to Reuters.