The board of private sector lender Yes Bank Ltd has decided to request the Reserve Bank of India (RBI) for an extension on Rana Kapoor’s term as the bank’s managing director and chief executive officer.
The banking regulator in a letter last week had said that Kapoor’s term as MD and CEO of Yes Bank would only extend up to 31 January, 2019. The board had earlier approved a three year term for Kapoor, starting September 2018.
However, the board after a meeting on Tuesday said that it had decided to seek a two-step extension from the RBI.
...it was decided that Reserve Bank of India be requested for an extension up to minimum 30 April, 2019 for finalization of audited financial statements for fiscal year ending 2019; there after subject to RBI approval, upto 30 September, 2019 in order for the statutory AGM process to be completed.Yes Bank Statement
It’s not so much an extension but this is the amount of time that the board thinks it needs to get a succession process in place, R Chandrasekhar, a board member at Yes Bank told BloombergQuint.
This has to be taken in a context and the context is that the bank has to find a successor, the successor has to be brought on board. And in appointments of this nature, the selection process takes time and the person selected also needs time to join. The conclusion arrived at was done keeping all these factors in mind.R Chandrasekhar, Board Member, Yes Bank
When asked whether Kapoor had been part of the board deliberations on Tuesday, Chandrasekhar said that he was there for part of the discussions without specifying further.
The board did not take up the differences between the two Indian Partners - Rana Kapoor and the family of late Ashok Kapur, Chandrasekhar said. He added that there also no discussion on Kapoor’s directorship at today’s meeting.
In a letter to the board of Monday, Madhu Kapur, wife of late Ashok Kapur had asked the board to follow an independent process in the search of a new CEO.
Shagun Gogia, daughter of late Ashok Kapur told BloombergQuint that the family is yet to see the fine print of the board’s decision today and decide on any future course of action.
Will The RBI Accept Yes Bank’s Request?
The board is trying its luck, said JN Gupta, managing director of proxy advisory firm Stakeholders Empowerment Services (SES). “In my view, it is unlikely that the RBI will agree to such a long extension. At most they may accept one or two months,” Gupta said.
The board has projected itself in a bad light by saying that they need one year time for succession planning, while the nomination and remuneration should already have some succession planning in place.JN Gupta, MD, SES
Gupta, however, added that there is a case to be made for the RBI to be more transparent in its actions. This would prevent excessive uncertainty for investors, said Gupta.
Shriram Subramanian, founder of proxy firm InGovern Research also felt that the RBI is unlikely to accept the bank’s request. “The grounds of request are as flimsy as the request itself,” Subramanian told BloombergQuint. He added that for a large bank to be dependent on one individual for finalising annual results or conducting an AGM is not appropriate.
Amit Tandon, founder and managing director of Institutional Investor Advisory Services India Limited (IiAS), took a different view and said that the RBI should consider the extension sought by the bank’s board. “Clearly the bank should have thought through its succession process and it has now set this in motion. In seeking additional time, the bank is wanting to ensure that transition is not disruptive,” said Tandon.
Appointment of Executive Directors
The board also agreed to form a search and selection committee to find a new CEO for the bank. The committee would consist of three existing members of the Nominations and Remuneration committee of the board as well as two external experts.
In the interim, the board said that in order to establish a long term succession plan within Yes Bank, it has been decided to appoint Rajat Monga and Pralay Mondal, currently senior group presidents, as executive directors of the bank. Appropriate recommendations would be made to the banking regulator, the board said.
(This story was originally published on BloombergQuint.)
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