Change Yes Bank Top Brass Now: Former Audit Chairman Uttam Prakash Agarwal
“I can say that the bank has become management-driven and it is not board-driven anymore,” he said.
Hours after resigning as the independent director of Yes Bank Ltd., Uttam Prakash Agarwal said that the lender’s management must be changed “immediately”.
“I will say this strongly,” Agarwal, who has flagged concerns about the deteriorating corporate governance standards at the beleaguered lender, told BloombergQuint in an interaction. “I can say the bank has become management-driven and it isn’t board-driven anymore.”
Agarwal faulted the lender with how it planned to raise funds. “The process followed for fundraising, which is a basic requirement, hasn’t been taken up properly by the management team and we were in the dark about the process.”
In his resignation letter sent via mail on Friday morning, which BloombergQuint has reviewed, Agarwal also cited reasons like failure of compliance and management practices.
Read the full conversation here:
Can you first tell us what prompted the resignation, you’ve given some bare-bone reasons, but can you give us any detail? We have the letter, it says “deteriorating standards of corporate governance”. We would like a little bit more detail if you could share on what prompted this very strongly-worded letter?
I can say that the bank has become management-driven and it’s not board-driven anymore. The process followed for fundraising which is a basic requirement of the bank has not been taken up properly by the management team and we were in the dark for the process.
So, you are essentially saying that most of your concerns stem from the capital-raising process?
From there, we came to know how the management is functioning because the board of directors has to believe the management team, right? So, we were considering that everything is going well but when the fundraising, and that was a crucial issue for all of us. And when I examined in detail, why the last four months, after the first QIP (qualified institutional placement) in this year, we were talking about the fundraising. Then I found out from the management. Earlier also, I sent the letter. The way, the first two meetings—what was discussed and what was reported to the SEBI and the stock exchanges, that wasn’t proper. Yesterday, there was a meeting and there also I put a dissent note on certain issues. I said that people and the stakeholders have a lot of trust on independent director, I should not continue.
There has been in the last few months like you said, capital raising has been the key issue that everyone has been watching. There was a lot of back and forth by the management. They would tell a certain publication something, there would be some statements to the exchanges, there have been various versions on who’s likely to invest. Is that specifically what you are talking about, the lack of clarity and conflicting reports?
Yes. That’s the corporate governance here. Here we all know that what is the definition of corporate governance. Everybody has to work, everybody has to work in the interests of the stakeholders.
When they put out the list of possible investors the last time, was the board kept in the loop? Was the board aware of the discussions that had happened with some of those investors in particular? Because as you know, some of those investors didn’t have very easily verifiable credentials.
No, you have the letter with you, you have the press release with you. It’s already in the public domain. These things are happening, you have the research team. Tell them, they will give you the whole picture. I cannot speak because matters are before the regulatory authority and I have put it before them. So, they’re the people who will take care of this situation.
All I am asking is were you kept in the loop when this investor list was put out by the management?
Only the verbal discussions. No document was provided. After a lot of persuasion, only two documents were provided to us. And that was also I felt wasn’t proper.
So, you were not given proper credentials of these investors?
Credentials and even the process, which has not given a firm assurance in my mind that my bank is going to get money and we can perform in the next quarter.
Apart from the capital-raising issues, you are the chairman of the audit committee. Where there any concerns on the audit front that you are also flagging?
As I said before, everything is before the regulatory authority. I have given the details, points and paragraph-wise. Verbally, I cannot remember whatever sections were there. I communicated it to all responsible regulatory authorities. So, they will examine the issue and they will come back to you and the whole public at large.
There was a news report in the Mint (business newspaper), which had suggested that the RBI had some concerns about your fit and proper status. Can you tell us if there was any discussion at the board level and whether those regulatory concerns were put aback or did RBI raise any issues?
Independent directors are appointed by the shareholders. RBI is only intimated who are the directors appointed by the nomination and remuneration audit committee report. I am on the board for the last 11 months. My approval from the board of directors, the AGM, shareholders, promoters, everybody has appointed me from April and even the renewal was done. Everything has been done. I am a chartered accountant. I am doing the audit of various companies. Where did the question come for fit and proper? I am on various boards. How come people are raising issues, I am trying to understand.
Are you saying that there’s no RBI letter asking to review your status or are you saying that there was one and now, it’s been cleared?
No. That’s a process. The RBI’s officer must have asked all the directors. They ask this every year. Every director submitted, in April, all the declarations for fit and proper. That is a routine process.
You’re not the first person from the Yes Bank board to resign. When we saw a shift in management, we saw a flurry of resignations. Can you tell us why there is so much upheaval at the Yes Bank board?
This is a choice of the person. I didn’t like how the things are happening. When a thing goes wrong because of the management, then the whole board of directors is blamed and not a particular independent director. Everybody must understand what is the accessibility of independent directors of the company. We will have to change the whole system. How many days are spent by the director in the bank in a year? 10 to 12, maybe 15 days at most. You expect so much responsibility from independent directors. This has to be discussed at a senior level.
Are you pointing to the fact that independent directors aren’t being allowed to function with the kind of efficacy that they should be allowed to function, which is adequate amount of information and consultation at the board level. Is that a problem at Yes Bank?
Not only at Yes Bank, but everywhere—in the whole corporate world. Today, if anything goes wrong, you make all independent directors responsible. People should discuss in detail how much time they are given and what are responsibilities that they are given. On paper it’s written that they are in charge of everything. But there’s conflict of interest, you cannot talk to the management team, you cannot do this and there are so many things are there as per law.
I understand the broader issues for sure. I am raising a specific question at Yes Bank because we have seen multiple resignations from its board.
It’s a very big bank and it is a very big institute created by someone. It depends on the people. They come and if they want to contribute and if then they feel that some things are not going properly, they may not continue.
Have you raised some of these issues with the management? You have mentioned a letter in your resignation that you have written to them but over a period, you have been there since 2018, have you raised these concerns with the new management since they came in?
Don’t count the years, 2018 or 2019 or 2020. Last November, I was there for one year and one month, right? In each and every meeting, I raised the issues. The decisions are taken on the majority of the directors’ votes. So, wherever I have had my dissent, I put it in the minutes. Wherever the system was supposed to be improved, I have tried my level best. Wherever I was successful, I have improved also.
But you are saying that, yet you had gotten to a point where you had to resign?
Yes. I didn’t like this total failure of corporate governance. Now, the bank is totally management driven.
One interesting thing is that, this is a board which also has an RBI nominee on it. You know that it’s not common for the RBI to put their own nominee on a bank’s board. Despite that, you are saying that the board is not doing its role that it should be doing in a bank?
I will not comment on the nominee from the RBI.
I am asking if that strengthened the board’s hold over the Bank’s decisions or its influence over the Bank’s decisions or it didn’t have that requisite impact?
Absolutely, someone of the stature of the deputy governor is nominated, it strengthens the board. There is no doubt on his capability because they have run our country’s institutions. One man, two men or three men cannot bring a lot of improvement. Ultimately, in a democracy, always a majority prevails.
Were there accounting issues that you detected?
The agencies to whoever I wanted to write, I have written to them. They will examine it and they will tell.
But a lot of investors, stakeholders and depositors are here who have interest. So, when you say corporate governance concerns, it’s a broad framework and you’re also the chairman of the audit committee. So, we do want to know if you are ruling out audit and accounting concerns and is this mostly about the capital raising issues or is it both?
Even various cases where the legal department failed because most of the NPA accounts—we were not able to recover the money because at the time of the sanctioning, how the legal department functioned, had a question mark. I kept asking them but there was no proper answer from the legal department.
You are saying there was not enough documentation to be able to recover dues if an account were to go bad?
Yes. The legal department plays a very important role.
Then the issues are for both managements. I am using separate terms because there was the MD and CEO Rana Kapoor’s tenure, there is MD and CEO Gill’s tenure. So, what you just said suggests that these are issues which have sort of been prevalent in both tenures?
I cannot comment because I was hardly there for one month, for one or two months with the previous management.
But you said that loan agreements were signed, and they were not perhaps to the best of what you think should be the case. But those loan agreements would have been signed a few years ago?
Individually, I have told the general thing otherwise the job is of the regulatory body and investigative agencies. I said only one thing that the things were not good and I didn’t like them in my individual capacity.
What would you like to see change? You have obviously written this letter for a reason that you want to force change at the bank or want to prompt change at the bank. What would you like see change in the near term? Specific with the capital raising program in particular?
The management has to be changed. I will say strongly.
You are saying that the new management needs to be changed?
Immediately.
The nature of your concerns is that grave that you are asking for the new management which has been appointed a year ago, needs to be changed?
It is a great asset to the country. There, we are not able to able to raise $3 billion. It’s a question mark on their capability.
And if they don’t manage to conclude their fundraising even today, would you advise greater regulatory scrutiny or greater regulatory hand holding at the bank?
It is the job of regulatory authorities. They will do it. I will inform them. I cannot say what they will do.
Watch the conversation here: