By Elton Gomes
Former bureaucrat Ashok Chawla has stepped down as non-executive chairman of Yes Bank on Wednesday, the private sector bank said.
A person familiar with the matter told Live Mint, on the condition of anonymity, that Chawla resigned due to personal reasons. As I resign, I wish to thank everyone at Yes Bank and wish the bank all the luck for the transition it is going through , Chawlas resignation letter read, the person said.
Sources said that Chawla stepped down due to controversy on his continuance on the board of directors after he was named in a CBI charge-sheet in the Aircel-Maxis case.
“Yes Bank announces that Shri Ashok Chawla, Non-Executive Independent Part-Time Chairman, has tendered his resignation from the Bank’s Board, with immediate effect, mentioning that during the current transition period, the Bank would need a Chairman who could devote more time and attention,” the bank said in a regulatory filing, PTI reported.
Yes Banks shares fell sharply after the Chawla announced his decision to resign. His decision generated uncertainty over the management of Indias fifth largest private-sector lender.
Yes Bank shares fell as much as 9.1 percent to Rs 202.25, in their biggest single-day fall since October 26. At 1:40 pm, the bank’s shares were trading at Rs. 205.85, down by 7.4 percent on NSE benchmark index Nifty50.
Chawla’s potential conflict of interest
According to sources, representations were being made by shareholders and stakeholders to the bank as well as regulators, such as SEBI (Securities and Exchange Board of India). The banks shareholders constantly raised questions over Chawlas tenure on the Yes Bank board after he was named in the charge-sheet filed in the Aircel-Maxis case by the CBI in July.
In addition, there was uncertainty over whether Chawlas role is in compliance with the Reserve Bank of Indias fit and proper norms after his name appeared in the chargesheet.
Since Chawla is also the chairman of the National Stock Exchange, people have questioned the possibility of a conflict of interest in his dual role.
In October, Yes Banks board received letters questioning Chawla’s continuation as chairman after being named in the chargesheet filed by the CBI in July.
“Following these letters the board asked the bank to take an advice from the RBI. The RBI was non-committal about the continuation of Chawla on the board but had warned about implications if the finance ministry asks questions on his continuation, a person familiar with the developments said, the Economic Times reported.
Yes Bank sought guidance from RBI on Chawla
After Chawla was named in the chargesheet in the Aircel-Maxis case, Yes Bank sought guidance from the Reserve Bank of India (RBI) concerning Chawlas tenure as non-executive chairman of its board.
The development came after the National Stock Exchange of India Ltd (NSE), which is chaired by Chawla, also assessed his continuance on similar grounds.
Yes Banks nomination and remuneration committee (NRC) wrote to RBI, referring to an October 4 letter that the NSE received about Chawlas continuance on the banks board.
While noting the contents of the letter (to NSE), the NRC directed the bank management to give a report along with its remarks on allegations and particularly verifiable facts and also obtain a legal opinion on the matter. In the meantime, the bank has received (on 26 October), a copy of another letter dated 22 October, addressed to NSE, raising similar issues, Yes Bank wrote in its letter to the RBI, Live Mint reported.
The NRC discussed the NSE letter at a meeting on October 24, while the banks board discussed the matter a day later. Yes Bank then said it is yet to receive a formal written declaration from Chawla on his fit and proper criteria as per the Banking Regulation Act.
India’s private banking crisis
Yes Bank, one of Indias largest private sector banks, has been undergoing a transition as it looks for a successor to promoter-cum chief executive Rana Kapoor, whose term is slated to end on January 31, 2019. The RBI has denied an extension to Kapoor, and the banks board was unsuccessful in granting him an extension at least till April. Several top employees from Indias private banks have stepped down after a poor performance.
The bad loan problem continues to cause significant problems. By the end of March 2018, the Indian banking sectors non-performing assets had risen to 11.6% of total assets, from 10.2% in September 2017.
After refusing an extension to Kapoor, the RBI was reluctant to grant Axis Banks CEO Shikha Sharma another three-year extension considering the banks poor performance. Sharma then announced her decision to step down by December 31, 2018, just six months into her term.
In addition, ICICI Banks chief Chanda Kochhar has been facing conflict of interest allegations over loan disbursal. Kochhar is currently on leave until a probe into the issue is complete.
Elton Gomes is a staff writer at Qrius