KOLKATA: Allahabad Bank has called an emergency board meeting on Tuesday following Finance Ministry’s direction to take away all executive powers from bank’s chief executive officer Usha Ananthasubramanian while Reserve Bank of India has put fresh business restrictions on the bank for poor financial results.
The government said it has initiated action for removal of Allahabad Bank chief executive officer and two executive directors of Punjab National Bank after Central Bureau of Investigation filed chargesheet against them in connection to fraud at PNB involving diamond trader Nirav Modi.
Ananthasubramanian was the managing director at PNB between 2015 and 2017, before she was appointed as head in Allahabad Bank.
Allahabad Bank called the board meeting late Monday, two people in the know said. Ananthasubramanain and the bank’s executive directors, S Harisankar and NK Sahoo, did not respond to phone calls and text messages.
The PNB board has Monday divested its two executive directors, KV Brahmaji Rao and Sanjiv Sharan, of all financial and executive powers.
Meanwhile, RBI advised Allahabad Bank to restrict expansion of risk-weight assets and to reduce exposure to un-rated and high-risk loans after it reported Rs 3510 crore net loss in the fourth quarter, largely owing to the exposure it had on the PNB-Nirav Modi fraud.
The Kolkata-based lender said last week that it had fully provided for the entire funded exposure in respect of two gems and jewellery borrower group, where fraud was declared by some banks. Its total provision jumped more than thrice to Rs 4873 crore although the bank did not specify how much of it was for coverage of these fraud cases.
The bank has already been under RBI’s prompt correction action framework since January and is subject to restrictions like branch expansion and dividend payment for its high sticky loan ratios and negative return of assets for FY17.
Its gross NPA ratio has now slipped to 15.96% as on March 2018, from 14.38% a quarter ago and from 13.09% a year back.
The banking regulator has also put restriction on creation of non-banking assets and on taking or renewing costly deposits and certificate of deposits.
“The board in its meeting dated May 11 has already taken note of the same,” the bank said Monday in a filing to stock exchanges.