Some developments in Dhanlaxmi Bank warrant immediate corrective steps: AIBOC to RBI

NEW DELHI: Bank officers' union AIBOC on Tuesday said a few developments in Dhanlaxmi Bank warrant immediate corrective measures by the RBI and requested the regulator to take appropriate steps to save the bank.
In a letter written to RBI Governor Shaktikanta Das, All India Bank Officers' Confederation (AIBOC) said it is a well-known fact in the banking industry that misplaced priorities and supervisory laxities had wreaked havoc on Dhanlaxmi Bank a decade ago.

The letter comes days after shareholders ousted seven directors of debt-ridden Lakshmi Vilas Bank. The bank was put under Prompt Corrective Action (PCA) Framework by the RBI in September 2019.

Dhanlaxmi Bank, a 92-year-old private sector lender, has been playing a stellar role in the economic development especially in the southern part of the country and has created a legacy in niche banking since the pre -independent era, it said.

"In the above backdrop, we wish to draw your kind attention to the following few areas, which need your immediate intervention for redressal of the issues in the best interest of the bank, millions of customers, the employees and all other stakeholders," it said.

Dhanlaxmi Bank was put under PCA Framework in November 2015 due to deteriorating financial health and only last year the restrictions on the lender were eased. Since then it has posted profit quarter after quarter.

Pointing out some of the issues, it said Dhanlaxmi Bank was forced to go through a New Generation experiment from the third quarter of 2008-09 till the fourth quarter of 2010-11 resulting in the increase in operation cost and indiscriminate lending.

"When things look like turning around, unfortunately we hear that there seems to be a visible shift in the policies bringing back the dreadful memories of the 'experimental years.'

There is again a renewed focus on the 'high-end variants' of CASA accounts where the minimum balance requirements are huge and the employees are told that opening of normal accounts would not qualify for internal business promotion campaigns," it said.

AIBOC alleged that the targets allocated to the members of sales team are made exclusive of the branch targets, thereby triggering an unwanted rat race among the employees.

Last week, another bank union AIBEA urged the RBI Governor to intervene into the affairs of Dhanlaxmi Bank which it alleged is "heading into wrong direction".

The All India Bank Employees' Association (AIBEA) in a letter to the RBI governor claimed the bank is looking to change its business profile, expand network in northern India and hire senior people on contractual basis at high remuneration which could land it into problems.

It has also come to the notice that the entry/authorisation rights of the sales team members in the banking software have been suspended, the AIBOC letter said.

"It seems that the intention is to replicate the practices of another institution, which will not at all be suitable for Dhanlaxmi Bank or for that matter any other old generation bank. The policies that are being pursued will be inimical for the bank," it said.

The union also requested the Governor to take appropriate steps in this regard, so that the nearly century old institution is allowed to grow in its own space catering to its own niche segments.

With regard to affairs of Lakshmi Vilas Bank (LVB), former vice president National Organisation of Bank Workers (NOBW) Ashwini Rana said after the failure of governance at Punjab & Maharashtra Co-operative Bank and Yes Bank, LVB is now on the same line.

Some more private players including Dhanlaxmi Bank are also facing the same problem. With these type of incidents, depositors are losing faith in these private banks, Rana said.

"Keeping in view of the governance failure and to protect the interests of depositors, Government should merge these private banks with Public Sector Banks and refrain from privatisation of PSU banks in these difficult times in the larger interest of country and its people," he said.