Yes Bank loses $3.1 bn in market value after RBI trims CEO term
Private sector lender Yes Bank Ltd’s shares tumbled nearly a third on Friday, wiping as much as $3.1 billion off its market value, after the Reserve Bank of India (RBI) reduced CEO Rana Kapoor’s term, creating uncertainty about its outlook.
The RBI said late on Wednesday Kapoor can serve as the lender’s chief executive only till January 31 next year, after shareholders voted in June to extend his term for three years, pending its approval.
Though the central bank did not give a reason for its decision, the move, according to market insiders, exemplifies the RBI’s increasingly assertive approach in tackling the bad debt problem plaguing India’s banking sector.
Kapoor, one of India’s most prominent bankers, co-founded Yes Bank in 2003 and has been instrumental in its rise to become the fifth-largest private sector bank with assets of $43.2 billion. But the rapid expansion came at acost.
Yes Bank’s bad loans spiked in October last year after a riskbased supervision exercise by the central bank forced the lender to account for 63.55 billion rupees ($881.1 million) more in the nonperforming category. Kapoor had termed it a “temporary setback” and said remedial steps were underway.
Indian banks have seen a surge in soured loans that hit a record $150 billion at the end of March and stricter rules enforced by the central bank are expected to have pushed the industry’s non-performing loans even higher. Earlier this year, RBI chief Urjit Patel said the central bank had limited authority over state-run banks that account for the bulk of bad loans in the sector, and called for reforms to give the regulator more powers to police such lenders. Those comments were refuted and criticised by government officials who, according to media reports, said monitoring the management of lenders was RBI’sjob.
Since then, Axis Bank, riddled with bad loans, said its long-time Chief wxecutive Shikha Sharma would quit, days after the central bank was reported to have expressed concerns about the lender giving her a three-year extension.
Yes Bank and RBI did not immediately respond to requests for comment.
MUMBAI/BENGALURU: