Utkarsh, Esaf CEOS step down over RBI directive on shareholding rules

MUMBAI: The chiefs of two small finance banks (SFBS) have stepped down following a central bank order citing their non-compliance with rules on holding shares in a company other than their own.

The Reserve Bank of India (RBI) in May asked Govind Singh, managing director (MD) and chief executive officer (CEO) of Varanasi, Uttar Pradesh-based Utkarsh Small Finance Bank Ltd, and K Paul Thomas, MD and CEO of Thrissur, Kerala-based Esaf Small Finance Bank Ltd, to step down, citing violation of Section 10 B(4) of the Banking Regulation Act, 1949. Both banks confirmed the development, adding that the bosses would be back once they sell their shares and comply with the rules.

Under the Act, a bank CEO cannot hold shares over ₹5 lakh, or shares adding up to 10% of the paid-up capital, in any other company. The CEO himself, his spouse or minor child cannot singly, or taken together, cross this threshold.

Both Singh and Thomas continue to be non-executive directors; however, day-to-day affairs and financial decisions are handled by a committee of directors appointed by the board.

“The committee of directors will take care of the management. AG Varghese, executive vicepresident at Esaf SFB will be the officer in-charge during the interim period,” Thomas said on the phone. He added that after the lock-in period expires in September, he would sell his shares to comply with the regulations.