RBI yet to approve YES Bank board appointments

For a year now, YES Bank's proposal to induct three of its senior management executives into the board of directors is pending with the Reserve Bank of India (RBI) for approval.

On June 28, 2013, the private sector bank had informed the stock exchanges that its board had approved the appointment of Rajat Monga, Sanjay Palve and Pralay Mondal as whole-time directors.

The board approved the proposals to make Monga executive director and chief financial officer, Palve the executive director for wholesale banking and Mondal the executive director for branch and retail banking. The appointments were subject to approval from the banking regulator and shareholders of YES Bank.

"This is to further build and strengthen the institutional and professional character of YES Bank as the professionals' bank of India," YES Bank had said.

It is learnt RBI's nod is still pending. While the reasons are not known, the central bank typically examines 'fit and proper' criteria before permitting board-level appointments in private sector banks.

"An application to RBI has been made by the bank recently," a spokesperson of YES Bank told Business Standard in an e-mailed response. The spokesperson, however, did not respond on the reasons for the delay.

RBI, however, had approved the appointment of M R Srinivasan as non-executive chairman, and of Ravish Chopra and Arun Diwan Nanda as independent directors of YES Bank last year.

YES Bank had announced the appointments of Monga, Palve and Mondal last year amid a demand by Madhu Kapur - widow of bank co-founder Ashok Kapur - for a seat on the board. Kapur had moved the high court here, claiming her right as co-promoter was being violated by not having being consulted before appointing new members on the board. Managing Director and Chief Executive Officer Rana Kapoor's wife, Bindu, and Madhu Kapur are sisters.

So far, YES Bank has maintained a stance of not considering Madhu Kapur as a co-promoter. The lender has said banking is not a family business and 'financial family successors' do not automatically become part of the promoter group of a bank, owing to regulatory criteria.

There are previous instances of the banking regulator expressing its discomfort with board appointments in private sector banks. For example, in 2011, Axis Bank dropped its plan to induct Vallabh Bhansali, co-founder and chairman of Enam Securities, on its board. The plan to induct Bhansali as an independent director was part of a deal in which Axis acquired Enam's investment banking, institutional and retail equities businesses for an all-stock deal, valued at Rs 2,067 crore.