Yes Bank disclosed in a regulatory filing on Tuesday that the banking regulator has appointed former RBI Deputy Governor R. Gandhi as an additional director on its board. The appointment is for a period of two years with effect from May 14, 2019, to May 13, 2021, or till further orders, the bank informed the stock exchanges.
The apex bank exercised powers conferred under sub- section (1) of Section 36AB of the Banking Regulation Act, 1949, to make this appointment. This is a rare decision taken by the RBI, usually when a bank needs close regulatory supervision “in the interest of banking policy or in the public interest or in the interests of the banking company or its depositors”, but the move is in line with the regulator’s increased scrutiny of CEOs in private banks and board members in recent times. According to BloombergQuint, the last time the RBI appointed an additional director was in May 2017, when E. Madhavan joined Dhanlaxmi Bank’s board.
Yes Bank has witnessed plenty of top level churn in the past few months, with independent directors quitting, the RBI asking its founder and former MD and CEO Rana Kapoor to step down, and at least one senior executive, Pralay Mondal, who had headed the retail and business banking vertical, tendering his resignation after Ravneet Gill took over as the new chief.
Just weeks after Gill, the former India chief of Deutsche Bank, assumed charge, Yes Bank reported its first-ever quarterly loss -net loss of Rs 1,506 crore for Q4 FY19 – on the back of a nearly ten-fold jump in provisioning. Making matters worse for the bank, the deterioration in asset quality and high exposure to corporate lending has already impacted profitability. In fact, the bank’s exposure to the Anil Ambani group is reportedly close to 50% of its common equity tier-1 capital. And with no fresh capital in sight, Yes Bank has already applied brakes on high growth by conserving capital. Meanwhile, rating agencies ICRA and India Ratings have both downgraded the long-term ratings of the bank.
So Gill comes in at quite a challenging phase. While announcing the fourth quarter results, the new CEO said he will lay emphasis on granularity, sustainability and digitisation, while maintaining highest standard on compliance and prudence in risk. He has also announced a watchlist of loans worth over Rs 10,000 crore, comprising low-rated loans at the risk turning into NPAs. Analysts told the news portal that this could be a potential pain point for the bank.
Welcoming Gandhi’s appointment, the bank’s board said the move will “significantly strengthen” its composition and Yes Bank will immensely benefit from his “experience and wisdom”.