After the Reserve Bank of India (RBI) asked the Yes Bank founder Rana Kapoor to step down from the post of chief executive officer and managing director in January 2019, the board of the bank is set to meet on Tuesday to decide on Kapoor's future role and his successor.
What can be Kapoor's position post January?
Kapoor, along with being the managing director and chief executive, serves as the whole-time director of the bank.
Legally, Kapoor's removal from the position amounts to his removal as a whole-time director as well. However, sources told CNBC-TV18 that Kapoor can retain his position on board as a nominee director subject to RBI's approval. Therefore, Kapoor's fate in the bank depends on the central bank's approval and the outcome of the board meeting. It would not be surprising to see Rana Kapoor take this case to the courts to retain his board position, sources added.
The Banking Regulation Act, states that if a key person — such as the chairman or the wholetime director — has been removed from office will also cease to be a director of the banking company and will not be eligible for appointment for four years from the date of his ceasing.
However, as per the Articles of Association, the Indian Partners (IP) representatives of the bank - Rana Kapoor and Ashok Kapur - can stay on the board of the bank even if one of them has to step down as the chief executive officer.
Ashok Kapur passed away in the Mumbai terror attacks in 2008 and Rana Kapoor’s position as an IP representative director holds. In June 2015, the Bombay High Court ruled that Madhu Kapur, the wife of the late co-founder of the bank Ashok Kapur, would have an equal right to make board appointments.
"The Indian Partners shall have the right to recommend the appointment of three directors collectively referred to as the 'IP Representative Directors', " the Articles of Association of the company read.
Two of the IP representative directors, as well as the Rabo representative director, shall not be liable to retire by rotation, the company's Articles of Association read.
The other two positions of IP representative directors remain vacant as the two were not able to reach a consensus and did not jointly nominate anyone, sources told BloombergQuint.
If Madhu Kapur and Rana Kapoor choose to exercise the right to nominate a CEO candidate, it may be difficult to get consensus from the warring promoters. Ultimately, it will be upto the central bank to give the final stamp of approval.
According to the norm, Kapoor is not liable to retire by rotation as his family holds 10 percent of the issued and paid-up capital.
"Notwithstanding anything to the contrary, the chairman, CEO and Managing Director shall not be subject to retirement by rotation under Article 122 but shall, subject to provisions of any contract between them and the Company, be subject to the same provisions as to resignation and removal of other directors of the company and shall ipso facto immediately cease to be the chairman, CEO and managing director, as the case may be, if he ceases to hold the office of director for any cause," Yes Bank's Article of Association states.The norm can be amended if the regulator asks the board of the company to tweak its Articles of Association and make the director liable to retirement.
Yes Bank's search for a new CEO
The board of the bank is appointing an independent search committee to find a new chief executive officer, sources told CNBC-TV18.
The Nomination & Remuneration Committee of the Bank will be tasked with this agenda, and an external headhunting firm may also be roped in.
Rajat Monga, the senior group president who has been with the bank since inception, is seen as a strong contender for the CEO post, the sources said.
Along with Monga, sources said that Pralay Mondal, head of the retail business and Padmanabhan Kumar, chief operating officer, are also seen as potential candidates for the position.
External candidates may find more favour with the RBI, added the source, citing examples of Amitabh Chaudhury being named CEO of Axis Bank and even Sandeep Bakshi being brought into ICICI Bank from ICICI Prudential Life Insurance.
The shortlisted names will then be submitted to the RBI for its final approval. The final decision on the appointment for the post will be taken by the central bank.
First Published: Sept 24, 2018 1:53 PM IST
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