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Yes Bank’s Uttam Agarwal Quits Over Governance Issues

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Uttam Prakash Agarwal, an independent director of Yes Bank Ltd, resigned from the board and stepped down as head of its audit committee citing major corporate governance concerns, but the lender said he was facing a ‘fit and proper’ status review as directed by the Reserve Bank of India (RBI).

The capital-starved bank also reported setbacks in its USD 2-billion fundraising plans. The lender also said its board has also approved a fresh round of capital raising of Rs 10,000 crore, for which shareholders’ nod will be sought soon, the troubled private sector lender told stock exchanges.

Canadian investor Erwin Singh Braich’s USD 1.2 billion offer will not be pursued further, it said and hinted that a USD 500-million offer from Citax Holdings and Citax Investment Group, which was being favourably considered, is also facing headwinds. The bank, which was waiting for regulatory nods as Citax’s offer entailed over 10 per cent ownership, has not yet been able to get a clearance on the “conditions precedent”. Without specifying timelines, it said the Citax offer will be taken up “during the next round.”

The troubled bank has been forced to shrink its book due to capital paucity and was hoping to close the fundraising by December. Need for capital has been necessitated as under new Chief Executive Officer Ravneet Gill, the lender has had to provide for sour loan bets taken under his predecessor Rana Kapoor whose term was cut short by the RBI last year over concerns on corporate governance. The central bank has also appointed former deputy governor R Gandhi to the board.

Meanwhile, Uttam Agarwal, a chartered accountant who had joined the board amid an upheaval in November, has quit citing “deteriorating standards of the corporate governance” under Gill. The bank retorted saying Agarwal resigned ahead of a discussion at the board to review if he qualifies under the RBI’s ‘fit and proper’ criteria.

Agarwal’s resignation letter shared by the bank said he had “serious concerns” over the “deteriorating standards of the corporate governance, failure of compliance, management practices and the manner in which the state of affairs” are being conducted by the bank under Gill. The bank said the observations made by Agarwal on the bank’s governance will be duly examined by the board.

The director, who has served as the head of the Institute of Chartered Accountants of India and was also part of the team investigating auditors’ role in the Satyam Computers fiasco, also named senior group president for governance Rajiv Uberoi and legal head Sanjay Nambiar in the letter, and claimed that he had raised similar concerns in earlier correspondence.

In a letter written on Friday to markets regulator Sebi, Agarwal listed out his concerns on non-disclosure and reluctance shown by Gill in informing the board of the names of the interested investors in fundraising exercise and inconsistencies in what he informed the board and what appeared in media. He also said the Citax Investment Group, whose proposal for the USD 500-million investment is being considered by the board, has a paid-up capital of only GBP 100.

Gill had to be reminded repeatedly for sharing information on the capital-raising plans, and the term sheets he eventually shared lacked essential details, the letter alleges, adding expression of interest by three domestic investors were called as commitments. It seeks the regulator to investigate gains made by investors due to sharing of false developments. Gill could not be reached for a comment immediately.

In a statement, the bank said it was reviewing if Agarwal complied with the ‘fit and proper’ framework on RBI directions and had also obtained opinion from legal luminaries on the same. The opinions were to be reviewed by the nomination and remuneration committee of the board but Agarwal tendered his resignation prior to the discussions, it said.

A media report on November 24 had said Agarwal had not disclosed details of criminal cases for cheating and criminal breach of trust filed against him to the bank. The same cases were mentioned in an affidavit he had filed while contesting for the Maharashtra Assembly elections on a Shiv Sena ticket. The bank’s shares on Friday closed 5.29 per cent down at Rs 44.80 apiece on the BSE, compared with the benchmark index’s overall gain of 0.36 per cent.

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