Nothing is sacred as India's central bank cleans up the financial sector

By denying a full three-year term to Yes Bank Ltd. Chief Executive Officer Rana Kapoor, India’s banking regulator has sent stern messages to not one or two, but five constituencies.

The first wake-up call is for the CEOs themselves: To preserve their equity interest in a bank, they’re free to chase higher price-to-book multiples, but not by pumping up what I’ve called the price-to-truth ratio.

Kapoor earned the ire of the Reserve Bank of India by wrongly classifying loans he should have counted as nonperforming. Yes wasn’t the only bank to do this. RBI’s asset-quality reviews showed problems at Axis