Two top executives of Karnataka Bank have resigned. On 29 June, Bank announced it. The bank said that Managing Director and CEO Srikrishnan Hari Har Sharma and Executive Director Shekhar Rao have resigned. Sharma’s resignation will be effective from July 15, while Rao will be from 31 July. Sharma has said that he now wants to be a Mumbai settlement, while Rao has said that he is having trouble living in Mangalore. He has given the reason for the resignation of some more personal things. All this looks normal when viewed from above. However, the news is indicating something else. Is this because of this conflict in the boardroom?
Karnataka Bank has said that resignations of both executives have been approved. A search committee has been formed for new recruits. Veteran banker Raghavendra Srinivas Bhat has been appointed as Chief Operating Officer, who will start work from July 2. The matter seems to be something else when these resignations and seeing the audited financial statement of the bank of FY25. It said that approved the expenditure of Rs 1.53-1.16 crore on consultants and Rs 0.37 crore on capital and revenue is beyond the jurisdiction of Hole-Time Directors Sharma and Rao.
The board of Karnataka Bank made them approved this expenditure. Auditors have said that this money should be recovered from both executives. It has been said in the reports that the expenses out of authority include the appointment of a deputy general manager. This appointment was made on January 9, 2025. However, the person appointed after three months was forced to resign for not approving this appointment of the board. The funny thing is that the person was later appointed as Assistant General Manager, for which the approval of the board was not required.
Sources in the banking industry say that there was increasing tension between the board and both these executives. The reason for this was Sharma’s ambitious plan for growth. He wanted to invest Rs 1,500 crore for growth. After becoming the boss of the bank, he raised this capital. The board was not ready for such a large investment. On the other hand, in response to the audit of the auditors, the bank had said that the issue has been resolved by negotiation.
Sharma is an experienced banker who has lived in HDFC Bank and YES Bank. He is the first CEO to be hired from outside to improve the status of Karnataka Bank. Sharma took over this responsibility in June 2023. Rao held his responsibility in February 2023. Both were responsible for making the functioning of the bank modern, increasing retail loans and strengthening digital and operational framework. However, there was not much progress in these matters.
Meanwhile, Karnataka Bank’s profit decreased. It fell from Rs 1,306.28 crore in FY24 to Rs 1,272.37 crore in FY25. The total deposit increased by just 6.96 percent. Gross Advancers rose by Rs 6.79 crore. This performance of Karnataka Bank is weaker than other banks of this size. This means that the purpose for which Sharma was appointed could not be fulfilled. Due to lack of approval for their decisions of spending, the conflict between the board and them increased.
It is said that the report of Auditors of Karnataka Bank has come to the information of RBI. RBI Governor Sanjay Malhotra is eyeing issues such as negligence in governance and more than rights. However, one thing is certain that the resignation of both executives has affected the credibility of Karnataka Bank. On June 30, the bank’s shares fell 8 per cent to Rs 192. MK Research has said that Sharma focused on digitization and retailing of the functioning of the bank. Now these works can remain incomplete.