Yes Bank Loses $ 3.1 Billion in Market Value After RBI Reduces CEO's Mandate

MUMBAI / BENGALURU (Reuters) – Shares of private lender Yes Bank Ltd fell nearly a third Friday, eliminating up to $ 3.1 billion from its stock market value, after the Reserve Bank of India (RBI) reduced its mandate on its prospects.

On Wednesday, the RBI said Kapoor could be the CEO of the lender until Jan. 31, after shareholders voted in June to extend his three-year term, pending approval.

According to the central bank, although the central bank did not give any reason for this decision, it illustrates the increasingly assertive approach of the RBI to tackle the problem of bad debt that rages in the Indian banking sector .

Kapoor, one of India's largest bankers, co-founded Yes Bank in 2003 and has contributed to its rise to become the fifth largest private sector bank with $ 43.2 billion in assets. But the rapid expansion has had a cost.

Yes Bank's bad debts in October of last year, after a risk-based supervision exercise by the central bank, forced the lender to account for 63.55 billion rupees ($ 881.1 million) more in the non-performing category. Kapoor called it a "temporary setback" and said that corrective measures were underway.

Indian banks experienced a sharp rise in lending to a record $ 150 billion by the end of March, and stricter rules imposed by the central bank should have pushed non-performing loans to the sector even more. high.

Earlier this year, RBI chief Urjit Patel said the central bank had limited powers over the state banks responsible for bad loans in the sector and called for reforms to give more powers to the regulator.

These comments have been refuted and criticized by government officials who, according to the media, said that the control of the management of the lenders was the work of RBI.

Since then, Axis Bank, riddled with bad debts, said its longtime chief executive, Shikha Sharma, would resign a few days after the central bank reportedly expressed concerns over the lender's three-year extension.

ICICI Bank has also appointed group veteran Sandeep Bakhshi as head of the group, and said CEO Chanda Kochhar will go on leave pending the completion of an investigation into allegations of conflict. # 39; interests.

"The RBI seems to be trying to put the foot down and establish an independent entity image with the latest decision on Kapoor," a Mumbai-based fund manager told Reuters.

"But the RBI must pay attention to collateral damage. Although we can not absolve the sins of bank loans, the RBI should be able to communicate such decisions in a slower and more efficient way, "he said.

Yes Bank and RBI did not immediately respond to requests for comment.

The Indian stock markets were closed Thursday for holidays.

DOWNGRADED STOCK

Yes, the shares of the Bank have dropped to a minimum of 218.10 rupees. Before Friday's trading, Yes Bank had a market value of about $ 10 billion.

At least two brokerages downgraded the stock, citing investors' uncertainty and doubts about the bank's future.

Nomura's analysts said the need to raise capital in times of crisis, investors' doubts about the quality of the assets and the RBI's concerns about continuing Kapoor's activities could weigh on the stock.

The research firm has reduced the title to "neutral" from "buy", reducing its target price to 345 rupees.

Yes Bank said its board of directors would meet on September 25 to decide on a plan of action.

Some analysts have said that even if Kapoor will not be CEO from next February, his influence on the bank will not disappear. At the end of June, he held a direct interest of 4.3% in the bank.

"Kapoor is a developer and he will be there to guide the new management," said AK Prabhakar, head of research at IDBI Capital.

($ 1 = 72,1250 rupees)