Rana Kapoor, chief executive officer and managing director of Yes Bank. (Photographer: Dhiraj Singh/Bloomberg)

No Clarity Yet On RBI Approval For Re-Appointment Of Rana Kapoor As Yes Bank CEO

With two days to go before the current term of Rana Kapoor as chief executive officer of Yes Bank ends, the lender is yet to inform investors about the view taken by banking regulator Reserve Bank of India on Kapoor’s reappointment. Kapoor’s term ends on September 1.

In June, the board of Yes Bank had decided to re-appoint Kapoor as managing director and chief executive officer of the bank for a period of three years and the bank received shareholder approval for the same as well. As is the case with all banks, the appointment was subject to approval of the RBI.

Earlier on Wednesday, CNBC TV-18 reported that the RBI had communicated with the board of Yes Bank asking them to reaffirm Kapoor’s appointment. The board had chosen to back Kapoor, the report said. BloombergQuint could not independently confirm this.

The bank itself has not informed stock exchanges of any communication from the RBI. An email sent by BloombergQuint to Yes Bank on Tuesday seeking clarity on Kapoor’s re-appointment was not answered. To be clear, it is not uncommon for the intimation of approval by RBI to come last minute.

Kapoor was among the founding team of Yes Bank, along with Late Ashok Kapur who died in 2008. As promoter he and his family own a 10.66 percent stake in the bank. He has been the bank’s CEO since 2003.

In a note issued earlier this week, Macquarie Research said that some banks, including Yes Bank, have become synonymous with their founder CEOs despite institutionalisation of processes at these lenders. As such, the upcoming RBI announcement on reappointment of Rana Kapoor is a key near term monitorable, the research house said.

Greater Scrutiny, Management Shuffles

The banking sector has seen increased regulatory scrutiny over the last two years as the RBI has tried to push for appropriate recognition of bad loans. The asset quality review conducted in 2015-16 has led to an increase in bad loans across banks, including Yes Bank.

Lenders have also been asked to disclose ‘divergences’ in bad loan reporting. This divergence is the difference between the bad loans as assessed by the RBI and the bank.

For FY17, the RBI judged gross NPAs at Rs 8,373.8 crore for Yes Bank. The bank, however, had reported gross NPAs at Rs 2,018 crore. The consequent divergence was at Rs 6,355 crore or three times the reported amount.

In FY16, the bank reported just a sixth of the bad loans assessed by the regulator. According to its latest annual report, the bank had reported gross NPAs worth Rs 748.9 crore as on March 31, 2016, while the RBI assessed the bank’s gross NPAs at Rs 4,925.6 crore.

To be sure, other banks too have reported a significant divergence in bad loan reporting.

Also read: ‘The Divergence Ratio’ - What The Newest Banking Indicator In Town Tells You About Banks

The RBI has also been tough on bank managements. Earlier this year, Shikha Sharma - the chief executive officer of Axis Bank, cut short her tenure. This came after reports that the RBI had asked the board to reconsider her re-appointment.