The Reserve Bank of India’s decision to appoint an additional director on the board of RBL Bank Ltd. was intended to ensure a smoother management transition at the lender, with chief executive officer Vishwavir Ahuja set to step down in June.
The regulator was not in favour of Ahuja staying beyond the one year permitted in last June, according to two people familiar with the matter. While in some cases, the RBI, after permitting a one-year tenure for a bank chief executive, had chosen to extend it, this was unlikely in the case of RBL Bank, the first of the two people quoted above said.
With six months left before Ahuja’s exit a transition plan needed to be put in place. To ensure that compliance and supervision related issues don’t worsen during the transition period, the RBI had chosen to appoint an additional director, the first person quoted above said. The regulator has the power to do so under the Banking Regulation Act.
According to the second person quoted above, tensions had emerged between Ahuja and the RBI. While there were some compliance lapses, these weren’t seen as material and Ahuja wanted the RBI to ease up on the pressure. There was an unfortunate ego battle between Ahuja and the RBI, this person said.
In addition, health issues faced by Ahuja were also a factor behind him seeking leave although some of these issues have persisted for some time now, the people quoted above said.
The bank’s board has approved Vishwavir Ahuja’s request for medical leave, said Rajeev Ahuja, interim MD & CEO, RBL Bank at a press conference on Sunday. The bank and current management team have the full support of RBI and recent developments are not a reflection on our performance, he said.
According to Rajeev Ahuja, he is not aware of any governance related investigations against any member of the bank. However, more needs to be done on risk management and compliance, he said.
A message sent to Ahuja seeking clarity was not answered. An email was sent RBI on Sunday. The story will be updated with any responses.