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Dhanlaxmi shares tank on window-dressing charges - Miserji Research Team

Kerala-based Dhanlaxmi Bank's stocks tanked today on allegations that the bank had resorted to window dressing and that its profitability was under pressure. The allegations were made by an employees association. The Thrissur-headquartered bank's management, however, refuted all charges. The All-India Bank Officers Confederation (AIBOC) has written to the Reserve Bank of India (RBI), expressing concerns over the financial health of the bank. The employees association also opposed the extension granted to chief executive Amitabh Chaturvedi for a period of three years. 'If the present management continues to be at the helm, the situation may deteriorate further,' said G D Nadaf, general secretary, AIBOC. The 1927-founded bank's stock slumped 24.22 per cent in intra-day trade to touch a two-year low. However, it gained later, following the management's denial of the mismanagement charges. The stock closed at `64.45, down 10 per cent compared to its previous close. The officers association has highlighted several concerns like the dependence on over-night borrowed funds, the capital adequacy ratio, and accused the bank of no real growth in the last six months. The association also alleged the bank was turning away from social banking by not catering to small agricultural borrowers, and levying high service charges. However, in a detailed statement, the management said, 'Dhanlaxmi Bank would like to unequivocally reiterate that all such allegations are baseless, and represent a motivated attempt by one of the employee associations de-recognised by the bank.' 'Moreover, the central bank had, last week, granted the bank's managing director and chief executive, Amitabh Chaturvedi, a second term of three years. The re-appointment is an affirmation of the fact that the audits and inspection of the bank's books have found nothing amiss,' the bank added. In late 2008, the bank had put in place a new management team, headed by Chaturvedi, who earlier worked with aggressive organisations like Reliance Capital and ICICI Bank. Chaturvedi, with his new team, shrugged off the image of a regional lender and had chalked out plans to become a pan-India bank. After Chaturvedi's induction, the bank registered a whopping 229 per cent growth in advances between December 2008 and June 2011, and diversified its loan book, with emphasising on retail banking. The new management also unveiled a new logo for the bank and shifted treasury operations to Mumbai, though the bank continued to be headquartered at Trissur. Dhanlaxmi's aggression on lending, branch expansion and venturing into newer businesses had also promoted the central bank to ask it to modify its speed. The bank, however, said it would consolidate its business this financial year, as business remained subdued due to the tight monetary policy.

Posted By Miserji Research Team On 12/10/2011