Is there an issue with this Private Bank? Why CEO has resigned?

 

Several news outlets have reported that Srikrishnan Hari Hara Sarma, the managing director and chief executive officer of Karnataka Bank, has resigned. On Friday, he turned in his resignation. But why did he step down? Internal disagreements with the bank's board of directors over a financial matter seem to be the cause of his resignation.

According to sources, Srikrishnan H., the MD and CEO of Karnataka Bank, has resigned and will leave the company on June 30. According to reports, Executive Director Sekhar Rao would also step down by July 30.

Reports state that the problem stemmed from a May consulting fee of Rs.1.53 crore, or roughly 15.3 million rupees. The bank's board did not sanction this money, which was utilized for consulting and related services. Furthermore, it was stated that this sum exceeded the financial thresholds that the bank's senior directors, also known as whole-time directors, are permitted to spend without board consent.

The statutory auditors of the bank observed this expenditure and noted that:

• It was done without proper approval.
• The money may possibly need to be recovered from the directors who approved the payment.

An investor asked the bank about this matter on the most recent earnings call. CEO Sarma responded by acknowledging the problem but attempting to downplay how terrible it was.

Sarma added that there was a misinterpretation of the internal policy of the bank. The error resulted from that confusion. He went on to say that the policy has been updated and clarified, and that similar errors won't occur again.

With more than 40 years of expertise in the banking sector, Sarma is a highly skilled banker. In May 2023, he was appointed Karnataka Bank's first foreign (outsider) chief executive officer. Prior to his nomination, all of the bank's previous CEOs had been longtime staff members who advanced through the ranks, therefore this was a significant shift for the organization.

Following a rigorous selection process, he was appointed. This time, the bank did not select an internal candidate. The bank's board of directors selected Sarma after the experts evaluated several profiles and suggested names.

His Career Journey:

• Started at Bank of America – This is where he began his banking career.
• Was one of the early employees of HDFC Bank – a leading private bank in India.
• He was part of the founding team at Yes Bank, which means he helped start the bank from scratch.
• Before joining Karnataka Bank, he served as the Managing Director and CEO of Jio Payments Bank from April 2015 to November 2021.