The Reserve Bank of India (RBI) has appointed a director on the board of Bandhan Bank to ensure smooth management transition and there are no material concern regarding functioning of the bank. The Kolkata-headquartered lender said on Monday that banking regulator has appointed Arun Kumar Singh, a retired central banker, as an additional director on the bank’s board for a one-year period until June 2025.

“The process of finding the successor is still on. This step has been taken to assist in orderly transition and to support board oversight,” a source told FE. There are no other material concerns with the bank currently.”

The development has come ahead of Bandhan Bank’s managing director and chief executive officer Chandra Shekhar Ghosh’s retirement from the bank on July 9.

Reacting to the news, shares of the bank plunged 4% in the morning trade but later closed at Rs 203.50 apiece, down 2% at the Bombay Stock Exchange.

According to sources, the private lender has still not sent the names of candidates to the RBI. The bank is currently searching for a new CEO and has appointed recruitment firm Egon Zehnder to identify the candidates.

Analysts say that this is an interim measure taken by RBI to ensure proper functioning of Kolkata-based bank.

“The issue in the case of Bandhan, in our view, is that there aren’t sufficient internal candidates in the bank who have served the bank for a long time at board level to be eligible for the CEO position,” said Suresh Ganapathy, head of Macquarie Capital’s financial research. “While the market may fear that there could be more skeletons in the closet (in terms of further increase in the stress pool), we believe this is more of a prudent measure exercised by the RBI.”

Arun Kumar Singh has working experience of almost 36 years in RBI and has worked in various capacities in the field of non-banking supervision and regulation, banking supervision and regulation, financial inclusion and monetary policy.

“Investors are most likely to wait-and-watch at the turn of events before taking a long term view,” said Kotak Securities in a note. “We don’t think one should look at this as a negative outcome.”