YES Bank to seek RBI nod to extend MD & CEO Rana Kapoor's term beyond Jan

The bank has set up a committee to find Kapoor's successor

The board of YES Bank will seek extension of Managing Director (MD) and Chief Executive Officer (CEO) Rana Kapoor till the next annual general meeting (AGM) in September 2019, the lender said in a filing on the BSE. 

The private lender said in its notification on Tuesday that the board will request the Reserve Bank of India (RBI) to extend Kapoor’s term up to at least April 30, 2019, citing Kapoor’s “role in the bank since inception” and “the time-consuming challenges of finding a new successor”. 

In case the RBI approves the request, the board plans to seek further extension up to September 30, 2019, for the statutory AGM process to be completed. 

“This period will be crucial to identify and enable a new incumbent to get fully conversant with YES Bank and its working,” said the bank in its filing. 

Industry experts believe the bank's request for extension, despite the RBI’s action, was not advisable. 

“This development shows the bank in further poor light. Especially since they (bank board) are seeking an extension on a flimsy ground,” said Shriram Subramanian, founder of proxy firm InGovern Research. 

The industry also believes it is highly unlikely that the RBI would grant the extension request.

“The RBI has decided to take action after deliberation and there is no point for the bank to seek time, especially a whole year, from the RBI now,” said J N Gupta, MD of proxy advisory firm Stakeholders Empowerment Services. 

The request for extending Kapoor's term as well as the sudden appointment of two persons as executive directors (EDs) point towards the bank's lack of succession planning, said Gupta. 

“If they did (have a succession plan), they would not ask for extension and instead, announce the next CEO,” Gupta said. 

The shareholders of the bank had approved Kapoor’s reappointment for three years, but the RBI cut the term to four months till January 31, 2019. 

The bank said it has set up a committee to find Kapoor's successor and said it has appointed two senior leaders of the banks, Rajat Monga and Pralay Mondal, as EDs to ensure long-term succession plan. The appointments await the RBI’s approval.

The bank set up a Search and Selection Committee in accordance with the RBI’s letter, which instructed the bank to look for Kapoor’s successor. 

The committee comprises three existing board members from the Nomination and Remuneration Committee — Chairman and Independent Director Brahm Dutt, Independent Director Mukesh Sabharwal, and Non-Executive and Non-Independent Director Subhash Kalia — in addition to two external experts. 

The bank’s stock had fallen sharply on the bourses due to the uncertainty regarding the bank’s succession plans after Kapoor' tenure was cut short. 

On Monday, the bank had sent out a media statement saying Kapoor would follow the decision taken by the bank board and the RBI. 

The rejection of the bank's request by the RBI could impact investor relations further. 

"The RBI is quite clear about its decision and will probably not give an extension. This will send out a clear message to investors,” said Subramanian. 

Kapoor and his brother-in-law Ashok Kapur, along with Rabo Bank, had floated YES Bank in 2004. Ashok Kapur died in 2008. Rana Kapoor and his family together own 10.67 per cent stake in the bank, as of June 2018. The bank’s stock closed on the BSE at ~219.85, down 2.83 per cent from its previous close.