RBI cuts Yes Bank CEO Rana Kapoor's tenure, shares drop 34 per cent

rana_kapoor Yes Bank CEO and MD Rana Kapoor

The shares of Yes Bank dropped by a whopping 34 per cent after the Reserve Bank of India shortened the term of its CEO and managing director Rana Kapoor. This makes it the bank's worst plunge in over 10 years.

RBI cut the tenure of the CEO and managing director till January 31, 2019. Previously, the bank had requested that its chief continue the term for three more years. While clear reasoning regarding this move has not been given by the central bank, there was a tussle earlier on how much of Yes Bank's loans be termed as non-performing.

The bank's board of directors are scheduled to meet on September 25 to decide on future course of action. According to Citigroup Inc., senior group president Rajat Monga, who has been with Yes Bank since its inception, could be a candidate touted to succeed Kapoor.

The private lender’s stock was expected to fall as most top brokerages downgraded it and slashed the target price after the Reserve Bank of India asked Kapoor to step down.

According to IDFC Securities, the cut in Rana’s term is a very big negative for the bank as it will slow down loan and fee growth and this could also impact the bank’s ability to raise high net worth deposits. Moody's Investors Service affirmed its ratings on the bank and has maintained the outlook on the ratings as stable.

The RBI, in a bid to root out a system-wide legacy of shoddy lending and ballooning, bad debts has taken a tough stance on other banks too. Despite support from shareholders, head of Axis Bank, Shikha Sharma, will step down at the end of 2018, more than two years before the proposed end of her term, after the central bank refused to extend her tenure.