Sunil Mehta to be Non-Executive Chairman, Prashant Kumar to be MD & CEO of YES Bank

The Government has constituted new board of directors for Yes Bank. It will be led by former Punjab National Bank chairman Sunil Mehta.

According to the notification, issued within hours of Union Cabinet’s decision, the new board of director will have Mehta as Non-Executive Chairman while Prashant Kumar, former Chief Financial Officer and Deputy Managing Director of State Bank of India, will be Chief Executive Officer and Managing Director. Mahesh Krishnamurthy and Atul Bheda have been appointed as Non-Executive Director. The board will replace the administrator (Kumar) who is to vacate office within seven calendar days from the date of notification.

Apart from these four, the investor bank will nominate two officers as Directors. RBI may appoint one or more persons as additional directors as it may consider necessary. Any investor who is permitted to have voting right of 15 per cent will have the right to nominate one director on the Board constituted. It will be open to the Board of Directors to co-opt more directors to it. Initially, all the board members will have a term of one year or until an alternate board is constituted.

Meanwhile, gazette notification for ‘Yes Bank Limited Reconstruction Scheme, 2020’ is silent on the AT (Additional Tier-1) Bond which has become a contentious issue. Earlier draft scheme, issued by the Reserve Bank of India, proposed writing off these bonds and now many of bond holders moved to court. Though, it was expected that the Union Government might do some changes, but it has not happened.

The scheme has been made operational from March 13.

Provision for employees

The notification mentioned that all employees of the reconstructed bank will continue to be employees of the reconstructed bank with the same remuneration and on the same terms and conditions of service, including terms of determination of service and retirement, as were applicable to such employees immediately before the commencement of this scheme, for a minimum period of one year. However, the board can consider discontinue the services of the key managerial personnel at any time as it deems necessary. As of now, it has more than 18,000 employees.

Branches

The offices and branches of the reconstructed bank will continue to function in the same manner and at the same location where they were functioning prior to the commencement of this Scheme, without in any way being affected by this Scheme. It will be open to the reconstructed bank to open new offices and branches or close down existing offices or branches, in accordance with the guidelines of the Reserve Bank and after complying with the necessary terms and conditions. As on date it has more than 1000 branches spread all over the country

Moratorium

It has been decided to lift the moratorium on the third working day from the date of commencement of scheme. It means by Thursday, March 19, depositors will be able to do normal banking means withdrawing amount without cap. On March 5, the RBI placed the bank under moratorium for a month and capped the withdrawal at Rs 50,000.

According to the notification, the rapidly deteriorating financial position of the YES BankLimited relating to liquidity, capital and other critical parameters, and the absence of any credible plan for infusion of capital necessitated the RBI to take immediate action in the public interest and particularly in the interest of the depositors and accordingly, the YES BankLimited was placed under moratorium by an order Central Government.

Since, government owned SBI will be largest investor with Rs 7,250 crore investment, the matter was placed before the Cabinet. Now, four private sector entities – HDFC (Rs 1,000 cr), ICICI Bank (Rs 1,000 cr), Axis Bank (Rs 600 cr) and Kotak Mahindra Bank (Rs 500) have also announced investment plan for Yes Bank.