The turmoil at Karnataka Bank stems from serious concerns raised by the bank’s statutory auditors over an unapproved expenditure of ₹1.53 crore. According to internal sources, the expenses were incurred without obtaining formal approval from the bank’s board. The auditors flagged this issue in their May 2025 audit report, terming it a violation of corporate governance norms.
The allegations have been directed at CEO Srikrishnan Sharma and Executive Director Sekhar Rao, both of whom were reportedly involved in authorizing the contentious transactions. This internal discord has reportedly led to a rift between the top executives and the board of directors, ultimately resulting in Sharma’s resignation, tendered on Friday.
While the exact nature of the expenditure is not publicly disclosed, sources indicate that it included administrative costs and high-value corporate decisions made without board ratification. The bank is yet to issue an official statement confirming the development.
Leadership Vacuum Looms: Both CEO and ED to Exit Before Term Ends
Sharma had assumed charge as CEO of Karnataka Bank on June 9, 2023, with a fixed tenure of three years. Sekhar Rao was appointed as Executive Director on February 1, 2023, for a similar duration. However, both are now set to exit their roles well before completing their tenures.
The premature departure of the top two leaders has triggered uncertainty in the bank’s strategic direction, with stakeholders—particularly investors and customers—keenly awaiting clarity from the board. According to reports, Rao is likely to step down by July 30, further intensifying the leadership void.
The development comes on the heels of similar high-level resignations in India’s banking sector, including that of the IndusInd Bank CEO earlier this year. Industry watchers view this as part of a larger shift toward tightened scrutiny and governance reforms in private banking institutions.
A Century-Old Institution Facing Modern Governance Challenges
Founded on February 18, 1924, Karnataka Bank is one of India’s oldest private sector banks, headquartered in Mangalore, Karnataka. The bank operates across 22 states and 2 union territories, with over 957 branches and 1,188 ATMs. Listed on both the NSE and BSE, it is recognized as an ‘A’ category bank under RBI classification.
Despite its robust operational network and wide customer base, the bank now faces a governance credibility test. With no official comment from the bank so far, markets and analysts are closely tracking developments. The bank’s next steps in appointing a new CEO and reinforcing board oversight will be critical in restoring investor confidence and institutional stability.
In the meantime, regulatory agencies are expected to maintain oversight to ensure that the transition is handled in compliance with industry standards. Insiders suggest that internal succession planning or external recruitment will be initiated soon to fill the leadership vacuum.