New Delhi, Jun 12: Rana Kapoor is seeking shareholder approval for another term as chief executive officer of Yes Bank Ltd., the Indian lender which has set records for both loan growth and the highest proportion of disputed bad debt among its top private-sector peers. Shareholders are due to vote Tuesday on whether to grant another three-year term to Kapoor, who has helmed Yes Bank since 2004. Assuming he receives approval, Kapoor’s new tenure will then have to be endorsed by the Reserve Bank of India.
Yes Bank is among India’s most highly-rated bank stocks and it trades at a valuation premium to most peers, data compiled by Bloomberg show, reflecting its strong loan growth and profitability. More controversial is its record for so-called bad-loan divergence, the difference between the soured credit reported in the bank’s results and as assessed in subsequent reviews by the RBI, at a time when the central bank is increasing its scrutiny of problem assets.
“The board and the CEO are responsible for what numbers are reported, including the divergence,” said Shriram Subramanian, the founder of Mumbai-based proxy advisory firm InGovern Research Services Pvt. Ltd. He says the bank is “pushing the boundaries of governance” by reporting a sizable bad loan divergence for two straight years.
Yes Bank argues that the impact of the divergence on the bank’s results has been small because it was subsequently able to recover many of the loans labeled as problematic by the RBI. For example, of the 64 billion rupees ($950 million) in additional problem loans that the RBI said should have been reported for the financial year ended March 2017, the bank later wrote back 51 billion rupees, according to an emailed statement from a spokesman for the lender.
“We would like to highlight that Bank remains committed to fullest compliance with RBI regulations or norms and with further learnings from past risk-based supervisory exercises is confident of ensuring full conformity to all RBI guidelines,” the spokesman’s email said.