A few months before his employment was about to expire, CS Ghosh, the MD and CEO of Bandhan Bank, submitted his resignation. According to Kotak Institutional Equities, there is concern over the sudden departure and the private lender is unlikely to benefit from explanations.

And as per the Kotak, the banking industry has seen similar sudden transformations before; YES Bank Ltd., RBL Bank Ltd., Ujjivan SFB, and South Indian Bank are just a few instances. It was mentioned that every previous instance had a different result and that not all of them were directly related to bad lending.

The unsettling aspect of Bandhan Bank's issue, it noted, is the timing - the RBI is the sole body that needs to approve the renewal. Perhaps better succession planning would have been a more acceptable solution.

According to Kotak, the bank has not yet fully recovered from the asset-quality problems that followed Covid, and the latest independent investigation of the bank's assertions that CGFMU started is still ongoing.

Ghosh stated in his letter that he had expressed interest in taking on a more expansive position within the organization. According to Kotak, the development was unanticipated and likely arrived at an unfavorable moment given that the bank is still struggling with issues related to stability and asset quality at the top management level.

"We have a positive view about the bank, but the current development is most likely to de-rate the bank from its current levels," said Kotak.

According to Kotak, investors will now probably wait more than a few quarters to evaluate the new appointment, the state of affairs, and any potential adjustments that may follow. Kotak has kept its 'BUY' recommendation on the stock for the time being. The stock has a fair value assigned to the brokerage of Rs 270.