Yes Bank, Former Audit Committee Chair Spar Amid Governance Concerns
Yes Bank board member resigns, citing corporate governance concerns.
Uttam Prakash Agarwal, Yes Bank Ltd.’s independent director and audit committee chairman, resigned today with immediate effect. In his resignation letter sent via mail on Friday morning, which BloombergQuint has reviewed, Agarwal cited the following reasons:
- Deteriorating standards of corporate governance.
- Failure of compliance, management practices.
- The manner in which the state of affairs of the bank are being conducted by Ravneet Gill, the lender’s managing director and chief executive officer; Rajeev Uberoi, senior group president governance and controls; and Sanjay Nambiar, legal head of Yes bank.
The letter also notes a dissent note sent by Agarwal regarding decisions taken on capital raising issues. Agarwal claims that he also sent a letter detailing his concerns to the bank on Jan. 9.
Agarwal had joined Yes Bank board on Nov. 14, 2018.
A few hours after Agarwal’s letter came to light, Yes Bank informed stock exchanges that they have received his resignation letter. The bank added that the nomination and renumeration committee of the board was set to review Agarwal’s ‘fit and proper’ status following a direction from the Reserve Bank of India.
The Bank would like to further intimate that the Bank was reviewing the ‘fit and proper’ status of Mr. Agarwal as directed by the Reserve Bank of India. In this respect, the Bank had obtained legal opinions from eminent jurists. These opinions were to be considered by the Nomination and Remuneration Committee of the Board in their meetings scheduled for today, i.e., January 10, 2020.Yes Bank Statement
On Nov. 24, Mint newspaper reported that the RBI has asked Yes Bank to review the status of Agarwal’s ‘fit and proper’ status as he had failed to disclose criminal cases filed against him.
“That is a process. The RBI’s officer must have asked all the directors. They ask this every year. Every director submitted this in the month of April. All the declarations for fit and proper. So, they submitted what they (RBI) asked for. That is a routine process,” Agarwal told BloombergQuint in an interview. The interview took place before Yes Bank released its statement to exchanges.
Management Of Capital Raise
Yes Bank has been in the midst of a capital raising process since new chief executive officer Ravneet Gill took charge. Following a $275 million qualified institutional placement issue in August, the bank continued to seek additional funds.
Over the course of the last few months, Gill, in various media interviews, suggested that the lender has seen interest from a wide set of investors, including a technology company. Following a board meet on Dec. 2, the bank said it had received $2 billion in bids, including $1.2 from little-know Canadian investor Erwin Singh Braich.
Within days of that board meet, Bloomberg reported that the bank may not consider Braich’s offer.
Agarwal raised specific concerns about the fund raising process and said that the bank has become “management-driven”, with the board of the directors being kept in the dark regarding key decisions.
“The process followed for fund raising, which is a basic requirement of the bank, has not been taken up properly by the management team and we were in the dark for the process,” Agarwal said. He added that discussions around the capital raising had taken place verbally and adequate documentation was not provided.
When asked whether the board was given adequate proof of the credentials of potential investors, Agarwal said said the details provided and the process followed did not provide adequate comfort that the bank will get the funds in time.
Concerns Raised Are ‘Grave’
Anil Singhvi, founder of proxy advisory firm IiAS said the concerns raised by Agarwal are grave. “It is a serious and grave concern raised by an independent director and the chairman of the audit committee, particularly for a bank which holds public deposits,”
If you look at Yes Bank’s governance track record it has been rather dismal for the last several years, but this (resignation), according to me, leads to a very grave and serious situation. All regulators and the board should really look at how serious are the charges made by Mr. Agarwal.Anil Singhvi, Founder, IiAS
Former chairman of the Securities and Exchange Board of India M Damodaran told BloombergQuint that the bank needs to do whatever it can to restore the confidence and trust of shareholders, depositors and stakeholders. He added that the seriousness of Agarwal’s allegations are not diminished by the fact that the bank had been asked to review his fit and proper status by the Reserve Bank of India.
The allegations must been seen for what they are. You should look at the allegations carefully, even when anonymous complaints come in. You are supposed to see whether there is verifiable information and then look at it to see what further steps need to be taken, even when anonymous and pseudonymous complaints come in. Here is a chairman of the audit committee making a complaint, who has just stepped out of that position, this is very serious and somebody must get to the bottom of this and put this to rest in the interest of the bank.M Damodaran, Former SEBI Chairman
WATCH | An Eventful Day For Yes Bank
