Mumbai: Yes Bank Ltd has sought guidance from the Reserve Bank of India (RBI) over former finance secretary Ashok Chawla continuing as non-executive chairman of its board after being named in a corruption chargesheet. This follows the National Stock Exchange of India Ltd (NSE)—also chaired by Chawla—scrutinizing his continuance on similar grounds.
Yes Bank’s nomination and remuneration committee (NRC) wrote to RBI on Friday, referring to a 4 October letter that NSE received about his continuance on the bank’s board.
“While noting the contents of the letter (to NSE), the NRC directed the bank management to give a report along with its remarks on allegations and particularly verifiable facts and also obtain a legal opinion on the matter. In the meantime, the bank has received (on 26 October), a copy of another letter dated 22 October, addressed to NSE, raising similar issues," said Yes Bank’s letter to RBI.
Mint has seen a copy of the letter.
The NRC discussed the NSE letter at a meeting on 24 October and the Yes Bank board discussed the matter a day later, Yes Bank’s letter said. It also said it is yet to receive any formal written declaration from Chawla on his “fit and proper" criteria as per the Banking Regulation Act.
An email sent to Yes Bank remained unanswered as of publishing this story.
On 19 July, the Central Bureau of Investigation (CBI) named Chawla in a chargesheet related to the Aircel-Maxis case. On 4 October, NSE received a letter seeking action on Chawla’s directorship on its board. This was followed by another letter demanding the same.
Yes Bank’s dilemma over Chawla comes even as it is struggling to find a replacement for CEO Rana Kapoor, whose term has been cut short by RBI.
According to one person familiar with the matter, who spoke on condition of anonymity, Yes Bank consulted a Mumbai-based legal adviser, and decided to seek RBI’s opinion and take a fresh declaration from Chawla regarding “fit and proper" criteria.
The bank’s letter mentions that Chawla has not yet “modified his last declaration submitted in April 2018 on ‘fit and proper’ criteria, as per the format prescribed by RBI".
“While NRC would further discuss the matter and all the related issues in its next meeting, it is considered desirable by the NRC to keep RBI apprised of the matter, as Chawla’s appointment as chairman was approved by RBI and he continues to remain as chairman subject to RBI’s relevant regulations, related instructions and orders on the matter," said the Yes Bank letter.
According to another person, who also spoke on condition of anonymity, Yes Bank’s legal advisers have also cited two recent similar instances, one of which relates to S. Raman’s resignation from an RBI committee upon being named in a CBI chargesheet, and another instance in which S. Ravi (chairman of BSE Ltd) stepped down from the board of IDBI Bank Ltd when named in a first information report filed by CBI.
On 5 November, Mint reported that the Securities and Exchange Board of India (Sebi) is evaluating Chawla’s eligibility to continue as chairman of NSE after the CBI chargesheet triggered multiple complaints. Sebi received the complaints in the first week of October and started its scrutiny the same week. The charges against Chawla relate to a CBI probe into suspected corruption in the Aircel-Maxis case. On 19 July, CBI, as part of its investigation, filed a chargesheet naming 18 individuals, including Chawla.
On 1 October, Special CBI judge O.P. Saini set the investigative agency a deadline of 26 November to secure the government’s nod to prosecute Chawla and others. Chawla might have to step down as NSE chairman if CBI gets the go-ahead to prosecute him, the Mint report stated, citing a person aware of that development.
Individuals under prosecution and those who have been convicted of any offence involving moral turpitude or an economic offence or violation of securities laws cannot lead stock exchanges under Sebi’s stock exchanges and clearing corporations norms.