RBI asks Axis Bank to reconsider CEO's Shikha Sharma reappointment

The Reserve Bank of India (RBI) has reportedly asked the Axis Bank to reconsider the appointment of CEO Shikha Sharma for the fourth term. 

RBI's queries come more than eight months after the board approved Sharma's reappointment, following a board approval.

Responding to a question from TOI, Axis Bank said in a statement "The bank's board follows a standard process on senior appointments, and forwards its recommendations to the regulator. This process is currently in progress and we are unaware of any final decision on this issue. We would also like to mention that the correspondence between regulator and bank is strictly private and confidential".

Citing reports the newspaper stated that RBI has become cautious on executive appointments as it has come under pressure from the government. 

Last month, the Rs 12,636 crore fraud at Punjab National Bank (PNB) had forced RBI to swing into action.

On March 6, the central bank revealed it has imposed penalties on two banks – Axis Bank for under-reporting non-performing assets (NPAs) and Chennai-based Indian Overseas Bank (IOB) for breach of know your customer (KYC) norms.

RBI slapped a penalty of Rs 3 crore on Axis Bank for violations of NPA classification and a fine of Rs 2 crore on IOB for breach of KYC norms on February 27, 2018. The penalty on Axis Bank was for under-reporting its NPAs by Rs 9,478 crore unearthed by the annual audit conducted by RBI.

The gross NPAs of Indian banks are expected to rise to Rs 9.5 lakh crore by March 2018, according to a joint study conducted by Assocham and Crisil. Stressed assets are estimated to hit Rs 11.5 lakh crore by the month-end. To stem rising NPAs, RBI is forcing banks to report the extent of stress so that remedial action can be taken.

RBI said in a release on Axis Bank, "Statutory inspection of the bank with reference to its financial position as on March 31, 2016, revealed violations of various regulations issued by RBI in the assessment of NPAs. Based on the inspection report and other relevant documents, a notice was issued to the bank in November 2017 advising it to show cause as to why penalty should not be imposed on it for failing to comply n with directions issued by RBI."

RBI said that after considering the bank's reply and oral explanation, it concluded that the bank failed to comply with the central bank directions and guidelines on the classification of NPAs and that a penalty was warranted.