New Delhi: The Reserve Bank of India asked the board of Axis Bank to review the decision to re-appoint Shikha Sharma as its MD and CEO for a fourth term. According to certain reliable sources, the decision is amid concerns over rising bad loans of Axis bank, being the country's third largest private sector lender.
The progress comes against the backdrop of persisting concerns over mounting Non-Performing Assets (NPAs) in the banking system.
Sources said the Reserve Bank of India (RBI) has shot off a letter to the Chairman of Axis Bank Sanjiv Misra, who is also a former Expenditure Secretary, with regard to the board's decision to re-appoint Sharma.
The bank's board has been asked to reconsider the decision to give a fourth three-year term for Sharma as Managing Director and Chief Executive Officer, the sources said.
According to them, the RBI's letter has also cited the bank's performance and deteriorating asset quality condition over the years.
In July 2017, the board of Axis Bank had approved re-appointment of Sharma. Her new term is to start from June 2018.
Sources said the re-appointment is yet to be ratified by the RBI.
As per regulations, appointments of top management personnel at private sector banks require the RBI's clearance.
"We wish to inform you that the bank's board follows a standard process with regard to senior appointments, and forwards its recommendations to the regulator (to the extent required). This process is currently in progress," Axis Bank said in a statement today.
The private sector lender's NPAs jumped by over five-fold in recent fiscal years.
The gross NPAs worth Rs 4,110 crore at the end of March 2015 surged to Rs 21,280 crore at the end of March 2017. During the same period, the lender's net profit halved from Rs 7,357.8 crore to Rs 3,679.2 crore.
Recently, RBI had also penalised the bank for incorrectly reporting bad loans. The asset-class divergence uncovered by RBI was Rs 9,480 crore in 2015-16 and Rs 5,633 crore in 2016-17.