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Shares of YES Bank fell over 5 per cent on Friday on uncertainty among investors and analysts on the private sector lender’s long-term leadership plans.
The Reserve Bank of India late on Thursday evening gave its approval for the re-appointment of Rana Kapoor “till further notice” as the Managing Director and CEO of the bank. However, the bank’s shareholders had proposed re-appointment of Kapoor for a three-year term from September 1.
Divergences in YES Bank’s bad loans have been an issue, although the lender has performed well in the past quarters. The RBI has also frowned upon ICICI Bank and Axis Bank on this issue.
According to sources, the RBI had questioned YES Bank on this as well as the sanctioning of loans to some borrowers.
For 2016-17, YES Bank had reported gross NPAs of ₹2,018 crore, while the RBI had estimated these at ₹8,373.8 crore.
Experts said that this is perhaps the first such instance of the RBI giving such an order, and could indicate that Kapoor may get a shorter term of about a year or so and the lender may have to start looking for an another leader. For no other private bank MD appointment has the RBI asked for additional information and asked the board to ‘re-validate’ the terms of reappointment at the eleventh hour, noted Macquarie.
“With Kapoor heading the bank since 2004, the RBI may ask the bank to start working on a succession plan,” said a person familiar with the development.
In the past, the RBI had asked the board of Axis Bank to reconsider a fourth term for its MD and CEO Shikha Sharma. Consequently, Sharma decided to step down at the end of the year, and the lender is looking for a replacement.
“It is unclear (why) the RBI would not approve the extension of term. It only creates uncertainty among investors; hope the RBI approves (it) soon. The issue of NPA divergence is unrelated to this approval. The Board, along with the MD and CEO, is also responsible for the disclosures,” said Shriram Subramanian, Founder and MD, InGovern.
Queries from BusinesLine to YES Bank remained unanswered.
On Friday, YES Bank shares continued to fall for the fourth consecutive day, losing 5.11 per cent on the BSE to close at ₹ 343.40.
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