Mumbai: Yes Bank on Friday said the appointment of former deputy governor of the Reserve Bank of India, R Gandhi, on the board is aimed at strengthening the bank. In a notice to stock exchanges, the private sector lender also said the appointment was in the best interest of all stakeholders.
“This is a very positive and constructive measure aimed at further strengthening the Board. This will not impede the smooth, independent and effective functioning of the bank in any way. The RBI is supportive of a strong and successful Yes Bank and we stand committed to serving the best interests of all our stakeholders," the notice added.
The clarification comes after RBI appointed Gandhi under sub-section (1) of Section 36 AB of the Banking Regulation Act, which empowers the regulator to appoint additional directors in the interest of the bank or its depositors.
Typically such appointments are made by the RBI to ensure a close supervision on a bank. Earlier Dhanalaxmi Bank and Lakshmi Vilas Bank had RBI-appointed directors on their boards.
Yes Bank had seen a management churn after its founder Rana Kapoor was forced to step down as managing director and chief executive officer by 31 January 2019. Weak corporate governance culture and divergence in reporting bad loans were the reasons behind the RBI’s decision to cut short Rana’s term.
Kapoor was succeeded by Ravneet Gill, former India CEO of Deutsche Bank on 1 March.
Also read: CEO Ravneet Gill planning to replace entire top management of Yes Bank
Weeks after Gill took charge, the bank reported its first-ever quarterly loss. The lender reported a net loss of ₹1,506 crore at the end of 31 March on account of higher provisioning against bad loans. It’s gross non-performing assets (NPA) stood at 3.22% at the end of the fourth quarter, against 2.11% in the previous quarter.
Also read: As Gill shines sunlight on Yes Bank’s past, investors get ready for pain
“While there are problems in the bank and the balance sheet looks stressed with capital position being weak, the move by the RBI could be a precautionary move as Yes Bank is much larger than banks such as Dhanlaxmi Bank or Lakshmi Vilas Bank and any failure here could have serious systemic implications. Hence the RBI could be cautious and pre-emptive here," according to Suresh Ganapathy, analyst, Macquarie Capital.
