The fourth largest private Bank - YES Bank - has got a new MD & CEO Ravneet Singh Gill from the Deutsche Bank. The bank had to search for a new CEO after the Reserve Bank of India (RBI) ended the tenure of founder and CEO Rana Kapoor midway. In the shortest possible time, YES Bank, a greenfield bank, has scaled up its business in terms of assets, revenues, and profits. The rise has been spectacular. But of late this first generation private bank has been hogging the limelight for all the wrong reasons. So what are the challenges new MD & CEO Gill faces:
i) Transition from founder professional to pure professional
The big change after Gill takes over is the transition of power and control from the founder professional to pure professional. The bank's co-founder Ashok Kapur died some years ago in a terrorist attack. Later, Rana Kapoor singlehandedly scaled up the bank's business. Today, the families of Rana Kapoor and Ashok Kapur are the promoters and largest shareholders in the bank. The market has seen how difficult it is to detach the founders from the company. Infosys is a recent example. A foreign banker Gill has to manage the expectations of promoters, regulators and the investors.
ii) Build a new team
Whenever a new CEO comes, he tries to build his own team. The new MD will surely build a team to scale up the retail and other business. There are already reports of retail head Pralay Mondal leaving the bank to join Axis Bank.
iii) Asset Quality deviation
YES bank faced huge deviation in the NPAs reported by it and the NPAs as per the RBI's assessment. Gill has to see whether adequate provisions have been made in case of stressed loans to bring the clear picture.
iv) Scaling up retail assets and liabilities
The bank is already focused on increasing the retail assets as well as liabilities. The retail advances are around 15.2 per cent, while CASA is about 33.3 per cent. For instance, Kotak Bank has a retail portfolio of over 40 per cent with CASA of 50.8 per cent. Retail loans are more stable with low NPAs. Every bank today is focused on expanding the retail banking.
v) Raising capital
The bank will have to raise equity capital to support the future growth. While the overall capital is quite comfortable, the bank has to raise equity capital very soon. The stock price has already taken a beating in the market post the asset quality deviation and the exit of Rana Kapoor. Gill's top priority will be to stabilise the bank, prove his mantle and then raise the capital once the share price moves up.
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