IndusInd Bank, Spandana Sphoorty Spar Over Key Managerial Appointments
IndusInd Bank says it cannot relieve its microfinance unit head and CFO immediately, a day after Spandana hired them.
Private lender IndusInd Bank Ltd. said it cannot relieve Shalabh Saxena and Ashish Damani from their roles at Bharat Financial Inclusion Ltd. until an ongoing review of microfinance business at the bank is completed.
Saxena is currently managing director and chief executive of Bharat Financial, while Damani is chief financial officer. Bharat Financial is a fully owned subsidiary of IndusInd Bank.
The announcement comes a day after competitor Spandana Sphoorty Financial Ltd. announced that Saxena had accepted the role of MD & CEO at the company, while Damani would be appointed as president and CFO.
"Neither Mr. Shalabh Saxena nor Mr. Ashish Damani have tendered their resignation from the services of BFIL," IndusInd Bank said in a statement to the exchanges.
According to the due process laid down by the bank, once the two executives submit their resignations, the board has to accept them. After that, a notice period would be announced and only then can they leave the services of Bharat Financial.
Moreover, Saxena and Damani are prohibited from accepting employment at a competitor without the prior approval of Bharat Financial's board of directors.
"...any purported acceptance by them of employment at SSFL would be in contravention of the terms of their employment with BFIL," the statement said.
IndusInd Bank said that certain transactions related to Bharat Financial are the subject matter of an ongoing review. The continued employment of Saxena and Damani at Bharat Financial is crucial for the successful closure of this review.
"Accordingly, they cannot be relieved from the services of BFIL, until completion of the said review," IndusInd Bank said.
Both microfinance lenders have had their fair share of troubles recently. Padmaja Reddy, the founder CEO of Spandana Sphoorty, resigned under a cloud, alleging that investor Kedaara Capital had forced her out. Currently, a managing committee appointed by the board is running day-to-day operations.
Similarly, allegations of evergreening of loans have been made by whistleblowers at Bharat Financial. In May, ground officials at the company found that a tech patch had malfunctioned, creating 84,000 new loan accounts without adequate customer consent. IndusInd Bank is currently in the process of conducting an independent review of the problem to assign accountability.