Yes Bank: Rana Kapoor agrees to return previous years’ salary bonus

Yes Bank Chief Executive Officer and Managing Director, Rana Kapoor has given in to the Yes Bank board’s diktats by agreeing to return bonuses given to him during the financial years 2014-15 and 2015-16. He will also not get any bonuses for FY17, FY18 and the current financial years. The decision came after the Yes Bank board recommended that Kapoor should not get any bonus for these fiscal years as the RBI had cut short his tenure. Also, no salary enhancement has been proposed for Kapoor in the last and current financial years. Yes Bank’s compliance team has written to the board and the RBI, informing them that Kapoor has agreed to pay back the bonus received for these years.

However, the Yes Bank board is likely to take a final decision on Rana Kapoor’s successor by December 15. The board is working on the final name and will soon convey its preference to the central bank, which will then take a final call on the matter before the new chief executive officer joins in February 2019. Kapoor, the founder and promoter of the bank, has been asked by the Reserve Bank to step down after the RBI found that the bank had under-reported its NPAs.

Yes Bank last week appointed US-based advisory company Korn Ferry to find a new candidate for the top post. For this, the bank also set up a committee, including three internal and two external members, to find the right candidate.

Earlier, the Yes Bank had decided to seek at least a three-month extension for Rana Kapoor, citing Kapoor’s association with the bank since its formation in 2004. The bank had also said that finding a suitable successor was a “time-consuming challenge”.

Madhu Kapur, the wife of deceased co-promoter Ashok Kapur and also his legal heir, had also reportedly written to the board, asking Kapoor to be sent on leave till January 31 to ensure a fair search. She had also raised objections over Kapoor’s leadership and had demanded a forensic audit of loans sanctioned under him.

While Rana Kapoor owns 10.66 per cent of the bank, Madhu Kapur, the wife of late Ashok Kapur who co-founded the bank with Rana Kapoor, owns over 8 per cent. Yes Bank, along with another private lender Axis Bank, was found to have under-reported non-performing assets by over Rs 10,000 crore each for two consecutive years in regulatory audits conducted by the RBI. Thereafter, the central bank had cut short the tenures of Rana Kapoor and Axis Bank CEO Shikha Sharma.

KC Chakrabarty Under Suspicion in Kingfisher and Airworth’s fraud case; CBI Issued LOC Against Him

Former Deputy Governor of Reserve Bank of India is in a tight spot as Central Bureau of Investigation accused him of being involved in Kingfisher Airlines and Airworth Travels & Tours Pvt Limited debt case.

The apex investigation authority has issued Lookout Circular against him by virtue of which he was restrained in May from going to London. His for the withdrawal of LOC in special CBI court in Delhi was rejected by the special judge Savita Rao, believing that his departure from India can become a weapon to escape justice.

However, Chakrabarty, however, denied all allegations of wrongdoing in a May 15 letter to the CBI director. Chakrabarty, who served as deputy governor of the central bank between 2009 and 2014, is now an NRI and lives in London.  He also served as the chairman and managing director of Indian Bank from 2005 to 2007. Chakrabarty was also the chairman and managing director of Punjab National Bank from 2007 to 2009.

Central Bureau of Investigation (CBI) held him ‘suspect’ in two cases, including one related to the debt default by fugitive tycoon Vijay Mallya-founded Kingfisher Airlines and other in the Airworth Travels & Tours Pvt Limited, forgery case filed by Indian Overseas Bank against the agency. The latter, according to Chakrabarty, has been doing his personal bookings after he left office in 2014.

Raghuram Rajan Held CEO’s Responsible For Increasing NPAs

Former Reserve Bank of India Governor Raghuram Rajan asserted that the government and banks have failed to trace even a single “high profile fraud” convict. A list of high-profile fraud cases has submitted by Rajan, to Prime Minister’s Office urging consolidated action against the offenders.

“I am not aware of progress on this front. This is a matter that should be addressed with urgency,” said Rajan in a note submitted to Parliament Estimates Committee chaired by Member of Parliament Murli Manohar Joshi.

Rajan said the size of frauds in public sector banks was small, relative to the overall volume of NPAs. As far as corruption was concerned, he said instead of holding bankers responsible for specific loans, bank boards and investigative agencies must look for a pattern of bad loans that CEOs were responsible for. “…some banks went from healthy to critically undercapitalised under the term of a single CEO. Then they must look for unaccounted assets with that CEO,” he said.

Looking ahead, Rajan called for caution on the new Insolvency and Bankruptcy Code with promoters testing it with continuous and, at times, frivolous appeals. “It is very important that the integrity of the (bankruptcy) process be maintained, and bankruptcy resolution be speedy” he said.

“Credit targets are sometimes achieved by abandoning appropriate due diligence, creating the environment for future NPAs. Both MUDRA loans and Kisan Credit Cards, while popular, have to be examined closely for potential credit risk. The Credit Guarantee Scheme for MSME run by SIDBI is a growing contingent liability and needs to be examined with urgency,” Rajan said.

While he blamed the banks for not carrying out independent due diligence at the time of approving loans, he said that the banks placed “excessive reliance on SBI Caps and IDBI” to do necessary due diligence. Citing reasons for NPAs, Rajan also said that unscrupulous promoters who inflated the cost of capital equipment through over-invoicing were rarely checked. “Too many loans were made to “well-connected promoters who have a history of defaulting on their loans,” he said.

Rupee Hits All Time Low, Closes At 69.5 Against Dollar

After closing at a record low of Rs 69.05 on Thursday, the rupee hit a record low of Rs 69.12 against the US dollar on Friday in early trade. It may be noted that the rupee has opened stronger by 4 paise at Rs 69.01 but soon fell 11 paise to register the new record low.

It may be noted that the bad run for the local currency has been continuing and on Thursday it took a 43-paise knock against the greenback for the first time as heightened US sentiments on the economy, after the comments of the Federal Reserve Chairman, took the US dollar to one-year high levels as compared to global currencies.

This is the biggest single-day fall since May 29 and goes hand in hand with a stronger US dollar.

The domestic currency suffered a major setback as forex sentiment turned wobbled once again with a resurgent dollar and a slew of local issues sparking jitters among investors.

The US dollar surged to fresh one-year high after the Fed chief’s testimony to the US Senate yesterday bolstered the expectations of interest rate hikes, though gradually.

The two-year Treasury yield was near the multi-year high mark of 2.624 per cent, hitting appeal of emerging market currencies.

Traders and speculators saw no signs of intervention by monetary authorities into the foreign exchange market to support the local currency, pushing the Indian currency down to a low of 69.07 in day trade.

The rupee had touched an all-time low intra-day low of 69.10 on June 28 but had recovered later on suspected RBI intervention.

The market mood has somewhat worsened as China steps up its game against the US after the People’s Bank of China devalued the Yuan once again in what many see as a move against the US.

Most Asian currencies also dropped against the dollar on as concerns over a tariff war between the US and China endured, keeping investors cautious on regional trades.

Extending its overnight bearish undertone, the rupee resumed substantially lower at 68.72 at the Interbank Foreign Exchange (forex) market on heavy demand for the American unit from importers and local banks.

It later took a deep slide to hit a session low of 69.07 in late afternoon trade before ending at 69.05, showing a sharp fall of 43 paise, or 0.63 per cent.

The Financial Benchmarks India private limited (FBIL), meanwhile, fixed the reference rate for the dollar at 68.8331 and for the euro at 80.1153.

The domestic bond market also showed volatile trading and the 10-year benchmark yield falling 4 bps to 7.79 per cent.

Over the past few months, the rupee’s value has been jittery due to increasing value of the dollar and rising US sentiments, with experts claiming that it may weaken beyond the Rs 70-mark against the dollar by the end of 2018.