Another exit at Yes Bank over Rana Kapoor's re-entry bid

MUMBAI: Yes Bank founder Rana Kapoor’s demand for a seat on the board and compensation for lost payment has thrown the private sector lender’s board into a tizzy, forcing the resignation of a second independent director in two days, three people familiar with the development said.
Mukesh Sabharwal, chairman of the nomination and remuneration committee, quit on Tuesday citing personal reasons. Former interim CEO Ajai Kumar had quit on Monday, also on personal grounds.

Rana Kapoor had sent two letters in early May seeking re-induction on the board as well as crores of rupees in compensation for lost remuneration. Many board members found this demand unreasonable, these people said.

“The two letters from Kapoor set off the bitter battle in the boardroom,” said one of the persons.

BOARD SPLIT OVER DEMAND
“There were some sympathetic to his demands. Others believed that it could go against the spirit of the RBI decision not to give him another term as CEO. If someone is unfit to be a CEO, how is he good to be on the board of the same bank,” the person said.


The RBI had refused to approve the renewal of Kapoor’s tenure as chief executive of the bank last year, citing governance and accounting lapses, forcing it to hire a new CEO.

The board is split over Kapoor’s demand to be re-admitted as director, said the persons. Following the resignations, it is down to 11 directors, including chairman Brahm Dutt. The development comes as the bank is in the process of raising funds and is in talks with private equity firms such as Advent International and Apax Partners. TPG and T Rowe Price, a portfolio investor, are also looking at investing in the bank. An annual shareholder meet is scheduled for Wednesday.

“Sabharwal has mentioned that he wants to devote quality time on his academic pursuits and hence has tendered his resignation,” Yes Bank said in an exchange filing.

Kapoor denied there was any controversy over his appointment.

“No such issues whatsoever,” he told ET in an email. “We have two board representatives and nothing else whatsoever please.” He didn’t elaborate.

The RBI had first turned down a three-year term for Kapoor, one of the bank’s co-founders. Kapoor’s bid to continue for a shorter term of two years was also turned down by the regulator, which led to the hiring of Ravneet Gill from Deutsche Bank as CEO.

Yes Bank did not respond to queries and Gill couldn’t be reached for comment.

After the RBI rejected Kapoor’s continuation as CEO, at least five directors have quit the board, including former finance secretary Ashok Chawla. The hunt for Kapoor’s successor was marked by the abrupt resignation of the search committee’s head, OP Bhatt, former chairman of the State Bank of India. The latest boardroom tussle could leave the bank vulnerable, with potential shareholders turning wary about corporate governance issues.

The resignations may have been sparked in part by social media chatter about remuneration and whether they could fulfil their roles.

“They said that why should they take all this nonsense at this stage of their lives,” said the second person cited above. “They could have performed their roles, but if some forces are against it, why should they go out of their way.”

The RBI had nominated retired deputy governor R Gandhi to the board of Yes Bank last month to make sure that the lender adhered to prudential norms and ensured checks and balances were in place.

The resignation of the two directors will leave key committees without their chairmen. These include the nomination and remuneration committee that decides on bank personnel and the credit committee that was headed by Kumar.