RBL Bank’s stock closed at 87.90, down 22.45% from the previous close on BSE, following the hiring of a new MD and CEO.
This was despite the fact that the S&P BSE Finance Index’s 30 equities all finished lower than their previous closing. The Bombay Stock Exchange’s Sensex fell 2.68 percent (or 1,456.74 points).
On June 11, the private sector lender told the stock exchanges that the Reserve Bank of India has approved R Subramaniakumar’s appointment as Managing Director and Chief Executive Officer for a three-year term. Subramaniakumar was the previous Managing Director and Chief Executive Officer of Indian Overseas Bank.
“A meeting of the Board of Directors will be scheduled to approve the nomination of R Subramaniakumar as an Additional Director and as the Managing Director and CEO of the Bank, and the shareholders’ approval will be secured thereafter,” the bank stated in a stock exchange filing on Saturday.
Centrum (down 8.46%), IIFL (7.08%), Bajaj Finserv (7.02%), Poonawalla Fincorp (7%), and L&T Finance Holdings (7%) were among the other notable stocks in the S&P BSE Finance Index that fell on Monday (6.78 per cent).
CLSA’s appointment generates more questions than it answers
CLSA observed in a report that such appointments at financial institutions have historically been associated with inferior asset quality and/or governance systems, citing the appointment of an ex-public sector bank executive as MD & CEO of RBL Bank.
As a result, the CEO selection raises more issues, including about the bank’s current leadership
“While we do not believe asset quality is a problem,” the study states, “this circumstance could have a potential weakening impact on liabilities, negatively impacting the bank’s performance and development trajectory.”