India's fourth-largest private sector bank, Yes Bank, tried to soothe investor nerves by stating it will be fully guided by its board of directors, the Reserve Bank of India (RBI) and other relevant stakeholders at its
board meeting on September 25, 2018.
On August 30, 2018, RBI said that Rana Kapoor can continue as managing director and CEO of Yes Bank till further orders. On September 17, the RBI asked Kapoor to step down by January 31, 2019 and asked the bank to search for a successor in the interim.
Yes Bank said, "The bank's management remains committed to protect the interests of all of its stakeholders."
RBI cited governance and regulatory issues for its decision. I
n June this year, Yes Bank’s shareholders had approved the re-appointment of Kapoor as the chief executive and managing director for three years, subject to final approval from the RBI.
Detailing the bank's performance in the statement issued to stock exchanges, Yes Bank said it has a demonstrated track record of consistent delivery of business and financial outcomes over the last 14 years, since commencement of its operations in mid 2004, across all critical parameters such as capital adequacy, credit risk, profitability, operating, efficiency, growth, etc.
"The bank has also consistently demonstrated a track record of raising and accreting capital across various instruments and cycles, with a Capital Funds base of Rs 50,000 crore ($6.9 billion), having started with a Capital Funds base of Rs 217 crore ($30 million) in 2004. This includes Rs 3,042 crore $420 million) of Basel III compliant Tier II bonds recently raised by the Bank in September 2018," it said.
Kapoor was among the founding team of Yes Bank, along with Ashok Kapur who died in 2008. As a promoter, Kapoor and his family own a 10.66 per cent stake in the bank. He has been the bank’s CEO since 2004.
Prior to establishing Yes Bank, Kapoor was CEO and Managing Director, and main Managing Partner of Rabo India Finance (RIF) (a corporate finance and investment banking organisation).
Sources told CNBC-TV18 that Kapoor may take his case against RBI to court. They said, "Legally, Kapoor's removal from the position amounts to his removal as a whole-time director as well. However, Kapoor can retain his position on board as a nominee director subject to RBI's approval."
The Banking Regulation Act, states that if a key person — such as the chairman or the wholetime director — has been removed from office will also cease to be a director of the banking company and will not be eligible for appointment for four years from the date of his ceasing.
However, as per the Articles of Association, the Indian Partners (IP) representatives of the bank - Rana Kapoor and Ashok Kapur - can stay on the board of the bank even if one of them has to step down as the chief executive officer.
Meanwhile, Yes Bank's board is in the process of appointing an independent search committee to find a new chief executive officer, sources said.
Rajat Monga, the senior group president who has been with the bank since inception, is seen as a strong contender for the CEO post, they said.
Along with Monga, sources said that Pralay Mondal, head of the retail business and Padmanabhan Kumar, chief operating officer, are also seen as potential candidates for the position.
The shortlisted names will then be submitted to the RBI for its final approval. The final decision on the appointment for the post will be taken by the central bank.
Yes Bank: Onus is on RBI to clear the air on why it cut short Rana Kapoor’s tenure