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The warring promoters of YES Bank are set to reach an agreement and will jointly nominate the bank’s new Managing Director and CEO.
This comes amid Moody’s on Tuesday downgrading the lender’s ratings, giving it a negative outlook due to issues in transition of the top leadership.
Sources told BusinessLine the bank’s two promoter groups — those of Rana Kapoor and Madhu Kapur — are now at an advanced stage of talks, discussing the provisions of the draft consent agreement. “The consent agreement is likely to be signed soon as both promoter groups are keen to work together to recommend the next MD and CEO,” said a person close to the development.
Under the draft agreement, both the groups will have equal rights and parity in information sharing. They will also jointly recommend the non-executive Chairman and MD and CEO of YES Bank.
Each group will also recommend one non-executive director each to the board and jointly recommend the third non-executive director. “All appointments will be subject to board and RBI approval,” said the source.
The YES Bank board is set to meet on December 13, by which time the agreement is likely to be hammered out.
Moody’s downgrade
But in fresh trouble for the private sector lender, Moody’s has downgraded its ratings to non-investment grade and changed the outlook to negative from stable on the back of various resignations from the board.
“The rating action considers the resignation of various members of the bank’s board of directors which, when seen in conjunction with the RBI directive in September 2018 to restrict the term of the bank’s MD and CEO as well as founder, Rana Kapoor, till 31 January, 2019, have raised Moody’s concerns over corporate governance,” it said in a statement.
While the rating agency believes the bank's reported credit fundamentals remain stable, the developments surrounding the transition in leadership and governance issues are credit negative because they complicate management's effective implementation of the bank's long-term strategy. “Furthermore, these developments could constrain the bank's ability to raise new capital,” Moody’s said.
It has downgraded foreign currency issuer rating to ‘Ba1’ from ‘Baa3’, and also the bank’s baseline credit assessment (BCA) and adjusted BCA to ‘ba2’ from ‘ba1’ The rating implies that these instruments are non-investment grade, speculative. The outlook, where applicable, has been changed to negative from stable.
Shares of the Bank fell 2.55 per cent and closed at ₹183.15 apiece on the BSE.
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