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Moody's downgrades YES Bank, changes outlook to negative on governance woes

Board resignations, coupled with RBI cutting Rana Kapoor's term, raise corporate governance concerns, says ratings agency

Nikhat Hetavkar  |  Mumbai 

YES Bank
Photo: Reuters

Ratings agency Moody's on Tuesday downgraded YES Bank's rating and changed its outlook for the private lender from stable to negative.

At present, is searching for a successor to Managing Director and CEO Rana Kapoor, whose term was cut short to January 2019 by the (RBI).

The ratings agency said that the resignation of the bank's various board members, seen in conjunction with cutting Kapoor's term, has raised Moody's concerns over corporate governance.

Moody's said that despite the bank reporting stable credit fundamentals, the developments on the governance issues, as well as transition of leadership, are credit negative. "They complicate management's effective implementation of the bank's long-term strategy. Furthermore, these developments could constrain the bank's ability to raise new capital," it added.

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Earlier this month, ratings agency ICRA placed the long-term rating for on watch with negative implications. The rating action factors in RBI's directive to the private bank to appoint a new chief executive to replace existing MD & CEO Rana Kapoor, which could constrain its ability to raise capital in the near-term, said ICRA.

YES Bank's independent director, R Chandrashekhar, resigned last week from its board due to discontent over internal developments. While the bank claimed in a BSE filing that Chandrashekhar resigned due to personal reasons, the latter refused this narrative. The bank's fresh filings did not disclose any reason for his resignation.


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Chandrashekhar's exit was the fourth board-level resignation at the bank in recent months as the markets reacted negatively to these resignations. Ashok Chawla quit as non-executive chairman and Vasant Gujarathi as additional director on November 14. Chawla cited the current transition period, saying that "the bank would need a chairman who could devote more time and attention". The BSE filing said that Gujarathi resigned because of "personal commitments". Former SBI chairman OP bhatt also resigned from the bank's committee set up to find a successor to Kapoor due to "potential conflict of interest".

Moody's said that the negative outlook is due to the uncertainty relating to the bank's asset quality and profitability, especially in the case of the bank reporting divergence due to RBI's annual risk assessment.

First Published: Tue, November 27 2018. 17:13 IST
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