Karnataka Bank Shares Slide 9% After CEO Resigns Citing Personal Reasons

On Monday, the Karnataka Bank shares fall by 8.5 percent, touching a day’s low price of Rs. 190 on NSE, following the resignations of its Managing Director and Chief Executive Officer (CEO), Srikrishnan Hari Hara Sarma, and Executive Director, Sekhar Rao. Sarma’s resignation, effective till July 15, 2025, was attributed to personal reasons, notably his decision to relocate to Mumbai. Sekhar Rao, whose resignation takes effect on July 31, 2025, cited challenges to relocate to Mangaluru and other personal reasons. The Board of Directors accepted both resignations and has established a dedicated search committee to identify suitable replacements for these critical leadership roles. In the interim, the bank has appointed Raghavendra Srinivas Bhat, an experienced senior banker, as Chief Operating Officer (COO) effective July 2, 2025, to ensure operational continuity. Additional substitute arrangements are being made, subject to regulatory approval.

The resignations follow a period of internal discord, particularly related to certain expenditures. During Q4 FY25, the bank’s statutory auditors flagged approximately Rs. 1.53 crore in expenses, which includes Rs. 1.16 crore for consultants and Rs. 37 lakh in capital expenditure, exceeding the delegated powers of the whole-time directors. These expenditures were not approved by the board, leading to scrutiny. The bank has stated under “Emphasis of Matter” in the Q4FY25 financial report.

Despite these leadership changes, Karnataka Bank remains operationally stable and financially robust. The bank has reassured stakeholders of its strong capital position and ongoing transformation journey, highlighting that its strategic initiatives will continue without disruption. The bank’s capital to risk-weighted assets ratio (CRAR) stands at a healthy 19.85 percent, and the provision coverage ratio (PCR) improved to 81.42 percent as of March 2025, reflecting prudent risk management.

Financially, FY25 presented a mixed picture for Karnataka Bank. The bank reported a net profit of Rs. 1,272.37 crore for FY25, marking a 2.6 percent year-on-year decline compared to Rs. 1,306.28 crore in FY24. Net interest income (NII) for the fourth quarter slightly rose by 0.35 percent to Rs. 3,310.38 crore, while operating profit for Q4FY25 dropped by 15.5 percent year-on-year. However, the bank’s total income (net interest income and other income) for FY25 declined by 0.8 percent to Rs. 4,579.90 crore.

On the asset quality front, the gross non-performing asset (GNPA) ratio stood at 3.08 percent at the end of March 2025, marginally lower than the previous quarter, while net NPA improved to 1.31 percent. The bank’s focus on retail banking yielded positive results: retail advances grew by 15.44 percent to Rs. 39,274 crore, and total deposits increased by 7 percent to Rs. 1,04,807 crore.

Looking ahead, the bank has signalled that its digital and operational modernisation efforts, initiated under the outgoing leadership, will continue. The search for new top executives is expected to bring in leaders who can steer the bank through its next phase of growth, with a focus on strengthening governance, improving customer experience, and expanding its retail and digital footprint.

Currently, while Karnataka Bank faces a leadership vacuum in the short term, its strong capital base, improving asset quality, and clear commitment to transformation position it well for future growth.