The Reserve Bank of India has deferred a decision to approve another three-year term to Yes Bank’s MD and CEO Rana Kapoor, while allowing him to continue in his position till further notice. The announcement added to the speculation surrounding Kapoor’s position in the bank and consequently, the lender’s shares ended 5% down on Friday.
In June, Yes Bank’s shareholders had approved a fresh three-year term for Kapoor as MD & CEO. However, the central bank not only took a long time to give it’s mandatory nod, which increased speculation over his position, but, when it did, it wasn’t for the three year term that the bank was seeking.
RBI’s stringent take on NPA reporting
Though neither the bank nor the RBI offered any explanation on the matter, media reports suggest that the sharp rise in the private sector lender’s divergences of bad loans may be the reason behind RBI’s decision. This divergence is the difference between the bad loans as assessed by the RBI and the bank. Yes Bank had reported a divergence of Rs 6,355 crore in FY17 as compared to Rs 4,176 crore in FY16, according to its most recent annual report.
Market players drew parallels of this development with Axis Bank’s CEO Shikha Sharma. RBI is also said to have asked Axis Bank’s board to reconsider the decision to extend its CEO’s term for three years in the wake of rising divergence in NPA numbers. Subsequently, Sharma decided to step down effective December, 31, 2018. While the bank has said it was Sharma’s decision alone, some reports claimed that the RBI has denied her a three year extension. In FY17, Axis Bank reported Rs 5,633 crore worth of divergences in its gross NPAs.
Yes Bank’s recent moves
Last month, the bank had partnered with Fintech startup Nearby Technologies to offer Bharat Bill Payment System (BBPS) services on its PayNearby app. BBPS is a utility bill payment ecosystem through which customers can pay several bills such as electricity, telephone, water, gas, and direct-to-home television at a single terminal or an electronic device like a smartphone — and receive instant confirmation once the payment is made.
Prior to that, the private sector lender, which is the bank partner for PhonePe’s UPI service, reported that it has processed more than 140 million UPI transactions amounting to Rs 290 billion in the quarter ending June 30th 2018.
YES Bank also claimed to have “successfully processed” 20 million Aadhaar Enabled Payments Service (AEPS) transactions in the quarter ending June compared to 5.1 million such transactions in the same quarter last year.