In a kneejerk reaction, the YES Bank stock crashed in early trade today after the RBI cut the tenure of its founder and CEO Rana Kapoor till January 31, 2019. Kapoor was given three-year extension by the bank's shareholders in June, but the central bank had not specified the exact period of his tenure.
The YES Bank stock tumbled up to 34.03% or 108 points in early trade to 210.10 level. At 9:44 am, the stock was trading 17 percent or 54 points lower at 263.65 on the BSE.
It opened at a loss of 10% in trade today. The large cap stock has been losing for the last two days and lost 23.56% during the period.
The stock is down 22% since the beginning of this year and has lost 34.75% during the last one year.
Kapoor has been the bank's CEO since 2003 and holds 10.66% stake in the lender along with his family.
After the shareholder's extension to Kapoor's tenure in June, the private sector lender waited for RBI's final stance taken by sector regulator on the reappointment of its CEO Rana Kapoor whose term ended on August 31, 2018.
On August 30, the RBI approved reappointment of Rana Kapoor as managing director and CEO till further notice from the central bank. The stock closed over 5% or 18.50 points lower at 343.40 level on August 31, 2018 as the RBI did not approve a full three-year extension on the CEOs tenure.
Exact reasons for the pending approval from the RBI were still unknown, but the apex bank has become tough on lenders for rise in bad loans and divergences in the reported figures.
YES Bank reported gross NPAs for FY17 at Rs 2,018 crore. However, gross NPAs of the private sector lender were estimated to be Rs 8,373.8 crore by the central bank. The resulting divergence was nearly three times the reported amount.
Another private sector lender came under the RBI scanner for misreporting bad loans.
Earlier this year, Axis Bank CEO Shikha Sharma cut short her tenure to December 2018.
The board had extended Sharma's tenure for the fourth time which would have ended in 2021. However, the RBI reportedly expressed displeasure at the board's decision clearing another three-year term of the CEO amid surge in bad loans.
The apex bank was alarmed over a high level of divergence between bad loans reported by the bank and those discovered by the RBI.
Over the last two years, the bank came under greater scrutiny of the regulator for misreporting bad loans. After conducting its annual risk-based supervision, RBI said the bank underreported bad assets worth Rs 9,480 crore in FY16 and Rs 5,633 crore in FY'17.