India's Equitas Small Finance Bank said on Thursday its longtime CEO P N Vasudevan would resign amid conflict-of-interest concerns as his daughter runs a non-banking finance company, sending its shares down as much as 20%.
Vasudevan, who has led the lender as managing director and CEO for over a decade, said in his resignation letter that investors had repeatedly raised the issue and that it was weighing on the stock. Vasudevan has led Equitas since it started off as a microfinance institution in 2007 and oversaw its conversion to a small finance bank in 2016.
A small finance bank is a lender that provides basic banking and credit services to underserved segments.
Vasudevan's daughter, Varshini Vasudevan Pathangi, founded Unico Housing Finance, an unlisted non-banking finance company, in 2023.
The arrangement had been disclosed to the board and the Reserve Bank of India, and there was no conflict of interest, Vasudevan said in his resignation letter.
"Sometimes perceptions are stronger than reality," Vasudevan said, adding that investors had told him the "overhang" was causing the shares to underperform.
This is not the first time Vasudevan has tried to move out. In 2022, he planned to step down to pursue philanthropic activities but withdrew the resignation after the board asked him to continue.
The board said on Thursday it has asked Vasudevan to stay on until a successor is found. The bank has asked its nomination and remuneration committee to identify internal and external candidates.
India's central bank had earlier this year reached out to the board and top management of the bank to understand the relationship between the lender and Unico, according to media reports.
Equitas said in August it had made only one deposit deal with Unico and no other transactions had been made until then.
The bank's total business crossed 1 trillion rupees in the September quarter, when it posted its highest-ever quarterly profit of 2.18 billion rupees ($22.9 million), according to Vasudevan.
Shares of Equitas have fallen 9.2% so far this year.