New head for Bharat Overseas Bank

G. Krishnamurthy, joint general manager, the Vysya Bank Ltd, is likely to take over as the chairman and CEO of the Chennai-based Bharat Overseas Bank Ltd (BOBL).

Confirming the development, top-level sources say that Reserve Bank of India (RBI) has given its nod favouring Krishnamurthy from the list submitted by BOBL's board.

Now the ball is in BOBL's court, which has to draft the terms of appointment for Krishnamurthy. The terms will have to be okayed by RBI. According to sources, this process is just a formality.

It is learnt that Krishnamurthy is inclined to join BOBL only on deputation rather by severing his ties with his parent bank, which incidentally holds a 14.66 per cent stake in BOBL's equity. Interestingly, BOBL is owned by seven banks - one nationalised and the rest, private banks. Besides The Vysya Bank Ltd, the stakeholders include the Indian Overseas Bank (30 per cent stake), The Bank of Rajasthan Ltd (16 per cent), The Federal Bank Ltd (10.67 per cent), The Karur Vysya Bank Ltd (10 per cent), The South Indian Bank Ltd (10 per cent), and Karnataka Bank Ltd (8.67 per cent).

If everything goes as expected, Krishnamurthy is expected to take charge of the Rs 1,268 crore deposit-based BOBL during the first or second week of April. By doing this, he will also avoid signing the BOBL's accounts for the year ending March 31, 2000.

The post of chairman and CEO in BOBL fell vacant when a two-member division bench of Madras High Court upheld the single judge's order setting aside the appointment of S. Srinivasan to these positions at the bank. Consequent to the judgement, Srinivasan was relieved immediately of his position in early February. The process of selecting Krishnamurthy to head BOBL was completed fast, thanks to the raps given by the court on the knuckles of BOBL's board.

During the proceedings, when asked by the bench about the steps being taken by BOBL's board to choose a successor for Srinivasan, whose term as per his appointment order was to expire on February 29, the bank's counsel replied that the board is waiting for the final judgement on the various writ appeals pending against Srinivasan's selection.

Castigating the board for this, the bench held that "we are totally unable to accept or appreciate such an explanation. Pendency of these writ appeals has nothing to do with the setting up of a panel for appointment of a chairman for the period commencing from 1st March 2000. Even if the bank had any such doubts, it should have taken steps to get the doubt clarified by taking out proper application before the court..."

The interesting aspect of the selection process is that the BOBL board, this time, decided to call for applications for the chairman and CEO post only from the eligible candidates of the shareholding banks. Last time, when Srinivasan was appointed, the bank had called applications through a newspaper advertisement and hired a private consultant for the purpose. It was this open procedure which helped the All India Bharat Overseas Bank Employees' Union to approach the court against Srinivasan's appointment (see This appointment raised eyebrows).

Would that be the reason for BOBL's board not approaching the market for recruiting the bank's head? Refutes a top level official, "Last time when the vacancy arose, the bank decided to follow what other private banks were doing -- going for market recruitment. Now the industry trend is in favour of selecting a person within the banking fraternity."

Be that as it may, the new chairman and CEO of BOBL has a tough task ahead of him. He has to streamline the bank's operations, mainly credit appraisals and loan waivers. But his major job is to normalise the industrial relations which, at present, is at the lowest ebb.

In this regard, the plus point for BOBL is its relatively young work force, including the union officer bearers. Meanwhile, it is learnt that an RBI inspection team is inspecting BOBL's accounts in the wake of the reference made by the bench in its judgement on the complaints of financial irregularities.