As early as April this year, RBI raised issues of corporate governance and 'serious lapses' with the functioning of Yes Bank, leading to the ouster of CEO Rana Kapoor in September
New Delhi: As early as April this year, the Reserve Bank of India (RBI) raised issues of corporate governance and “serious lapses" with the functioning of Yes Bank Ltd, according to documents reviewed by Mint. In subsequent comments, RBI observed “persistent governance and compliance failure reflected by the bank’s highly irregular credit management practices, serious deficiencies in governance and a poor compliance culture".
It was equally critical of Yes Bank’s managing director and chief executive Rana Kapoor and made adverse observations about his management of one of India’s largest private sector banks.
“The serious lapses in the functioning of and governance in the bank and, in particular, the poor compliance culture, other serious violations of statutory and regulatory guidelines during the past three financial years, notwithstanding the subsequent corrective actions stated to have been initiated by the bank, reinforce our grave concern and regulatory discomfort with the role of the incumbent MD & CEO in the governance, management and superintendence of the affairs of the bank," RBI said, as it declined a request from the bank to reappoint Kapoor.
The board also recommended that no bonuses be paid to Kapoor for fiscals 2016-17 and 2017-18 and did not propose any bonus for the following year. It has recommended not raising Kapoor’s salary for 2017-18, as well as for the current year.
The board also communicated to RBI the decision made at its 25 September board meeting to engage a consulting firm for a comprehensive risk, governance and compliance review.
On 11 October, the bank hired Korn Ferry to assist the committee in finding a successor to Kapoor, who has been at the bank’s helm since its inception in 2003.
Yes Bank also appointed former Insurance Regulatory and Development Authority of India (IRDAI) chairman T.S. Vijayan and former State Bank of India chairman O.P. Bhatt on 5 October as two external experts in its search and selection panel to shortlist a successor to Kapoor.
This comes at a time when Yes Bank’s estranged promoters, Rana Kapoor and Madhu Kapur, have initiated moves to reach an out-of-court settlement, Mint reported on 8 October.
At the end of June, Kapoor held a 4.34% stake and Madhu Kapur 7.62%. Other promoters entities are Yes Capital (India) Pvt. Ltd (3.28%), Morgan Credits Pvt. Ltd (3.05%) and Mags Finvest Pvt. Ltd. (1.7%).
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