The RBI’s decision to cut down the term of YES Bank MD and CEO Rana Kapoor has left many in the industry surprised even as questions have now arisen over the private sector bank’s succession plan.

“Reserve Bank of India…intimated that Rana Kapoor may continue as the MD & CEO till January 31, 2019,” YES Bank had said in a regulatory filing on Wednesday. The YES Bank board is scheduled to meet on September 25 to discuss the “future course of action”. Kapoor, as one of the founders and promoters of the bank, could potentially continue on the board and even be appointed as the Non-Executive Chairman once the term of current Chairman Ashok Chawla comes to an end in October 2019.

But a more immediate challenge for the private sector lender would be to find a successor for Kapoor in four-and-a-half months. Paresh Sukthankar, who recently stepped down as Deputy Managing Director of HDFC Bank, is being seen as a strong contender.

However, Citi Research in a note said the time period could be short to find a suitable external candidate. The bank may also have to postpone its capital-raising plans, it added.

The senior management of YES Bank includes Pralay Mondal, Business Head - Retail Banking and Business Banking, and P Kumar, Chief Operating Officer.

Regulatory concerns

The RBI has been concerned about regulatory and governance issues at the bank as well as divergences in its bad loan reporting. Before giving its approval, the RBI is understood to have been in touch with YES Bank over the terms of Kapoor’s re-appointment and loans to certain borrowers.

Current and former bankers observed YES Bank has grown tremendously under Kapoor. The RBI’s decision sent out a strong signal to banks to clean up their act, they said.

“It is not just YES Bank but other private sector lenders also who had faced questions over divergences in NPA reporting. And it is not just YES Bank, but a few other private sector banks also where the promoter continues to be the MD and CEO,” noted a private sector banker who did not wish to be named.

Earlier this year, the RBI had also questioned a fresh three-year term to Axis Bank CEO and MD Shikha Sharma, who subsequently decided to step down at the end of this year.

Investors however, took the RBI announcement in their stride. After initial speculation about Kapoor’s term, the YES Bank scrip fell 1.44 per cent to close at ₹318.50 on the BSE on Wednesday.

Meanwhile, Moody’s Investors Service affirmed the ratings of YES Bank and maintained the outlook as stable.

“YES Bank’s profitability is strong, and Moody’s expects that the bank can maintain low credit costs over the next 12-18 months,” it said in a note.

Kapoor, along with Ashok Kapur, had founded the bank in 2004. He has been heading it since its inception.

Related Topics