Money & Banking

RBI appoints R Gandhi on board of YES Bank

Our Bureau Mumbai | Updated on May 15, 2019 Published on May 15, 2019

R. Gandhi

Scrip falls 8% after ex-RBI Dy Governor appointed as additional director

 

The Reserve Bank of India seems to be continuing its close watch on developments at private sector lender YES Bank, leaving investors a worried lot as the bank’s scrip fell 8 per cent on Wednesday.

The private sector lender’s scrip fell 8.01 per cent and closed at ₹143.65 apiece on the BSE after the central bank appointed its former Deputy Governor R Gandhi on the board of YES Bank as additional director.

According to BSE data, the scrip touched a new 52-week low of ₹142.50 apiece on Wednesday.

“This is to inform you that the RBI...in exercise of powers conferred under sub-section (1) of Section 36AB of the Banking Regulation Act, 1949, appointed R Gandhi, Ex-Deputy Governor, RBI, as additional director on the board of the bank for a period of two years with effect from May 14, 2019, to May 13, 2021, or till further orders, whichever is earlier,” YES Bank said in a regulatory filing.

Lender hails move

Welcoming the appointment, YES Bank said it will significantly strengthen its board composition, and that the bank would immensely benefit from Gandhi’s rich experience and wisdom.

Analysts are keeping a close watch on the scrip and also flagged capital requirements as a key issue, apart from governance norms.

Lalitabh Shrivastawa, AVP – Research, Sharekhan by BNP Paribas, said: “RBI’s move to nominate an additional director on the board of YES Bank brings back concerns of governance issues once again for the bank. Coming on the back of recent downgrade in earnings and tight capital adequacy situation at the bank, the stock can further get de-rated owing to uncertainties on the growth outlook ahead. We have cautious view on the stock.”

Another analyst, who did not wish to be named, said there are concerns on whether there are more outstanding issues at the bank, due to which the RBI wants to monitor developments closely.

Earlier, the RBI had appointed its nominee directors in other banks such as Lakshmi Vilas Bank and Dhanalaxmi Bank.

Q4 loss

The move comes soon after YES Bank reported a ₹1,507-crore loss in the fourth quarter of 2018-19 under its new Managing Director and CEO, Ravneet Gill.

Since then, rating agencies, including ICRA and India Ratings, have downgraded the bank’s long-term ratings. CARE and Brickwork Ratings also cut ratings on various credit instruments of YES Bank.

The RBI action comes as a surprise as it was widely believed that the lender’s concerns were addressed with Gill taking over after former MD and CEO Rana Kapoor’s term was cut short.

The bank’s board also underwent a significant overhaul in the last few months.

 

 

Published on May 15, 2019

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