Mumbai: The board of Yes Bank on Tuesday said it would ask the Reserve Bank of India (RBI) to grant an extension of eight months to managing director (MD) and chief executive Rana Kapoor.
The board will first seek an extension for Kapoor till 30 April for finalization of financial statements for the year to 31 March, and thereafter a further extension till 30 September for completing the annual general meeting process, it said in an exchange filing.
“The board also decided that given the role of Shri Rana Kapoor as MD and CEO since inception of the bank in 2004, and the time consuming challenges of finding a suitable successor, that the incumbent MD and CEO be given further time in his current position beyond 31 January 2019," the statement said.
In June, Kapoor had sought a three-year extension till 31 August 2021, but the regulator had agreed to extend his tenure only till 31 January 2019. Mint had reported on 19 September that the bank is likely to request RBI to reconsider its decision.
The board in its meeting on Tuesday also decided to set up a search committee to identify a successor to Kapoor. The committee will include three existing nomination and remuneration committee board members, along with two external experts.
As part of the succession plan, the board also decided to promote Rajat Monga and Pralay Mondal as executive directors, subject to approval from RBI. Both Monga and Mondal are considered to be front runners for the top job.
The board, however, did not take up the issue of Kapoor continuing on the board of Yes Bank as a nominee director after he steps down. Kapoor, along with his associate firms, owns 10.6% in Yes Bank.
Even if the search panel selects a successor to Kapoor, Yes Bank’s knotty articles of association (AoA), which the Bombay high court ruled in 2015 must be followed by its warring promoters, will make the board’s task harder and time-consuming.
What could come in the way is the dispute between the bank’s promoters, Rana Kapoor and Madhu Kapur, and the AoA they signed, which has been registered with the ministry of corporate affairs.
“We are going through the fine-print of today’s board meeting outcome and will respond to further queries in appropriate time," said Shagun Gogia, daughter of late Yes Bank co-founder Ashok Kapur.
The AoA was agreed upon by the bank’s promoters in 2005 and amended in September 2017. According to the AoA, both the promoters have to jointly agree on the names of a prospective successor for the position of managing director and chief executive, before the proposal is sent for RBI approval.
Section 127 (a) of Yes Bank’s articles of association says the managing director and chief executive shall not be subject to “retirement by rotation" but be subject to the provisions of the contracts between them and the company. Also, under Section 127(a), to appoint any whole-time director, the board shall follow the recommendation made by the two promoters. So, the process of appointing Kapoor’s successor or any whole-time director to head the bank is going to take long. Kapoor is currently the only whole-time director on the bank’s board.
According to a person close to Yes Bank: “In June, the board’s decision was sent to RBI. In the first week of August, Yes Bank was given to understand that the chief general manager at RBI had approved Kapoor’s reappointment and the concerned executive director at RBI too has acknowledged the CGMs’ approval. So, the board wants to know what made RBI change its stance in such a short period and restrict Kapoor’s tenure only till January."
On Tuesday, shares of Yes Bank lost 2.83% to ₹ 219.85, while the benchmark Sensex gained 0.96% to 36,652.06 points.