Union charge hammers Dhanlaxmi Bank shares

Private lender Dhanlaxmi Bank faced a run on its stock on Tuesday when a media report said one of bank’s employee unions had made allegations of financial irregularities. 

The scrip fell to its 52-week close on both the Bombay Stock Exchange and the National Stock Exchange after a Mumbai-based personal finance magazine reported that the All India Bank Officers Confederation had alerted the Reserve Bank of India (RBI) about alleged manipulation of accounts and provisioning, poor capital adequacy ratio and asset-liability mismatch at the Kerala-headquartered bank.

Dhanlaxmi’s stock later recovered on the BSE to close at Rs64.45, down 10% over the previous day’s close. It closed 9.79% down at Rs64.60 on the National Stock Exchange as against the Monday’s close.

The bank was quick to refute the allegations.

“Dhanlaxmi Bank would like to unequivocally reiterate that all such allegations are baseless and represent a motivated attempt by one of the employee associations de-recognised by the bank,” it said in a press release.

The union had accused that the bank had borrowed high cost funds in the form of Certificate of Deposits (CDs) of about Rs2,500 crore. The bank clarified it has a limit of raising Rs1,500 crore through
CDs.

In defence, the bank also said that the RBI last week granted Amitabh Chaturvedi, the managing director and CEO of the bank, a second term of three years, which affirmed the fact that the audits and inspection into the bank’s books have found nothing amiss.

The bank also said in statement that the number of employees in the said association is minuscule and form less than 10% of the bank’s workforce.

According to Dhanlaxmi, the campaign seemed to be the handiwork of some misguided employees and some rank outsiders who have no stake in the well-being of the institution.
As per the financial results for the quarter ended June 2011, Dhanlaxmi Bank’s net profit dropped to Rs 34 crore, recording a fall of 43.6% compared with net profit of Rs 60.3 crore reported in the same quarter of previous fiscal.

(With Reuters)