Yes Bank stock moved down closely a third on Friday, deleting approximately $3.1 billion of the company’s value when the Reserve Bank of India lowered Rana Kapoor’s term, making serious uncertainty on its outlook.
The Reserve Bank of India announced a few days ago Kapoor can work like the lender’s chief executive just until Jan 31, 2019, since stockholders voted a few months ago to continue his term for 3 new years, waiting for its approval.
While the RBI did not explain that decision, this step shows the strongly confident approach in resolving the problematic debt issue that badly affects the country’s banking sector.
Kapoor is considered as one of the top bankers in India, where serves on various leading positions heading many important roles in the banking sector. He founded Yes Bank in 2003 with several others prominent bankers and that institution becomes the fifth biggest private sector bank in that country. Yes Bank currently holds assets of $43.2 billion in total. However, the fast development has made some problems.
The bank’s defective loans pike impaled in October 2017 following a risk-formed supervision test by the RBI demanded the lender to transfer $881.1 million more in the separate category. Kapoor had defined that a “temporary setback” and told remedial steps were undertaken.
Other banks in India have also recorded a fall in soured loans that reach a maximum $150 billion at the end of March and stronger rules introduced by the Reserve Bank of India are estimated to have punched non-performing loans even higher.
The central bank chief Urjit Patel announced the RBI had only limited authority over the state banks, which are connected to a large number of bad loans and asked for changes to offer the regulator stronger influence to monitor such lenders.
These suggestions were often criticized and refused by the state officials who declared observing the management of lenders was the central bank’s job, according to various news reports.
From that point, Axis Bank, hardly affected by bad loans, announced its chief executive Shikha Sharma must leave his job position after a long time. The statement came shortly after the RBI confessed to having clear concerns on the lender offering her a three-year extension.
ICICI Bank pointed Sandeep Bakhshi, a group veteran, as its new head, and declared CEO Chanda Kochar might move on pending the finalization of a probe into the clash of interest allegations.
“The Reserve Bank of India looks to be struggling to establish a picture of being a separate entity with the newest decision about Kapoor,” a fund manager from Mumbai said to Reuters.
“However, the Reserve Bank of India has to be careful of unexpected damage. While some cannot overcome the curses of lending at banks, the central bank might be capable to touch such great decision in a more efficient manner,” he added.
The Reserve Bank of India and Yes Bank did not instantly respond to different questions. The country’s stock market was closed on Thursday because of a holiday.