Karnataka Bank CEO has finally resigned but Why? Know the Full Controversy

Karnataka Bank Managing Director (MD) Srikrishnan Hari Hara Sarma and Executive Director (ED) Sekhar Rao have finally resigned from their respective positions. MD said that he is resigning due to personal reasons.

Earlier, there were a lot of reports that MD will resign but the Bank had not confirmed it. This controversy of resign started after a month-and-a-half of the auditors of the bank raising red flags about some expenses incurred by them beyond their delegated powers.

As per reports, MD spent crores of rupees without approval by the board. The reason behind his resignation appears to be internal differences with the bank’s board of directors regarding a financial issue.

According to reports, the issue was related to a consultancy expense of ₹1.53 crore (about 15.3 million rupees), which was spent in May. This amount was used for consultancy and related work but was not approved by the bank’s board. Also, this amount was said to be beyond the financial limits that the bank’s senior directors (called whole-time directors) are allowed to spend without board approval.

The bank’s statutory auditors noticed this spending and pointed out that:

• It was done without proper approval.
• The money may possibly need to be recovered from the directors who approved the payment.

During the bank’s recent earnings call, an investor questioned the bank about this issue. In response, CEO Sarma admitted that the issue existed but tried to minimize its seriousness.

He said:

“It’s a very simple matter. The amount involved is very small. It’s more about governance – the rules and approval process. If any expense goes beyond allowed limits, we explain the situation and try to get it approved afterward.”

Sarma further said that there was a misunderstanding in interpreting the bank’s internal policy. That confusion led to the mistake. He added that the policy has now been clarified and corrected, and such mistakes will not happen again.

Career Journey of MD &CEO of Karnataka Bank

• Started at Bank of America – This is where he began his banking career.
• Was one of the early employees of HDFC Bank – a leading private bank in India.
• He was part of the founding team at Yes Bank, which means he helped start the bank from scratch.
• Before joining Karnataka Bank, he served as the Managing Director and CEO of Jio Payments Bank from April 2015 to November 2021.