RBI's authority on deciding CEO's term (Yes Bank)

Question to the gurus on the forum…

How come RBI have a say on who gets to/stays to be the CEO of a banking company? Isn’t it the job of the board of directors of the company? I know that the banks are all under the supervision of RBI for obvious reasons but isn’t this power too overreaching in consequences? Almost feels like we are living in a fascist regime.

Looking at Yes Bank, several lakh crores of investor wealth is destroyed over one, rather eccentric, decision to remove Rana Kapoor. Do we even know why he was removed?

I researched this topic to find the extend of RBI authority on the banks but couldn’t find one. Any pointers would be appreciated.

PS- I am not an investor of Yes Bank; just weirdly fascinated with the whole saga :slight_smile:



RBI act bestows interalia with following powers on RBI (like many other central banks in the world)

  1. RBI can fire any(!!!) officer in any bank regulated by it, the said officer can not have recourse to any court. The officer can only approach central government with his grievances and central govt may issue directions to RBI. (happened with several CEOs of the banks recently and in the past)

  2. RBI can supersede (meaning sack!!!) entire board of the banks regulated by it. (Happened in cases of Global trust bank, Nedungadi bank and several other failed banks).

Lets assume what happens If these restrictions are not there. Will u and me keep our deposits in Kapoor’s and Kochar’s bank. I would rather buy gold and burry it beneath my house.

MY SIXTH SENSE TELLS ME THAT next in line is a baby faced crony billionaire CEO of another pvt bank who refuses to dilute his holding as per RBI rules.



I’ll answer your question in two parts, first on the rational argument of banking regulation and then to your politically heavily charged statement “Almost feels like we are living in a fascist regime.”

Almost every financial crisis in the history of economies has been because of financial sector malpractices.

The 2008 crisis was totally because of the inability of the central bank & SEC to regulate Collateralized debt obligations (CDOs), limits on lending norms, etc. The funny thing was that secretary of US treasury was himself CEO of Goldman Sachs. No wonder GS was profitable even during the crisis. This is exactly the type of cronyism that a regulator is supposed to prevent.

The Indian NPA problem which could very well would have turned into a full blown crisis if not for the asset quality review (ASQ) done by RBI.

Now, some recent examples of private banks issues, ICICI Bank Chanda Kochaar’s conflict of interest, Shikha sharma of axis bank and now Rana Kapoor of Yes bank.

They all are really good bankers and have taken their respective banks to new heights but historically all banking problems have arisen when the top executives overstayed their normal terms. They keep on putting their bank weaknesses under the rug and the real mandate of RBI is exactly to not let this happen, so here is what RBI found out:

—- “YES bank had reported gross NPAs of Rs 2,019 crore for 2016-17. But as assessed by the RBI, the gross NPAs should have been Rs 8,373 crore for that year; this meant a nearly 5 percentage point increase in its gross NPA ratio for 2016-17 than was reported.”
—- https://economictimes.indiatimes.com/industry/banking/finance/banking/yes-bank-under-reported-npas-by-over-rs-4000-crore-in-fy16/articleshow/58650307.cms

In my opinion it was a good decision, there were indications that all is not right in YES Bank.

Now answer to the political statement on “fascist regime”.

Please stop getting influenced by this constant propaganda, especially if you are into a rational field like business and finance. India is not going to turn into a fascist Regime. Elections are coming these narratives are all part of it.

Educated people should first read about the history of India, history of fascism and how Communist and capitalist order came into world before jumping directly on such baseless conclusions.


Baby faced :joy:. So True

1 Like

How come RBI have a say on who gets to/stays to be the CEO of a banking company?

I think the bank was getting rich valuation on account of lower NPAs and new CEO suppose to relook at NPAs as per RBI guidelines.

Market is greatly exaggerated both on upside and downside. Let the dust settle down. If there is no problem with balance sheet of bank then no worry for long term investor.

PS- I am not an investor of Yes Bank. Its always better to use consciousness before start investing in speculative instrument.

1 Like

It’s not facism because RBI has set banking guidelines for every bank to follow, some evidence( NPA divergence, 50% rise in complaints of customers, 20% rise in legal cases against the bank, miselling third party insurances, etc) was found that management of yes bank was not following then to the full extent so yes to protect the investor and the consumer interest RBI took this decision
RBI is there to ensure that banks play by the rules, not make profits on the back of consumer losses

1 Like

Thanks all…I appreciate everyone’s inputs and opinions ! :+1:


I agree with your points , hats off to RBI , In India RBI is the only one great Institution

1 Like

Couldn’t understand the logic behind forcing Uday Kotak to decrease his stake in Kotak Mahindra bank from 30 to 20%:thinking::cry:
Is this type of regulation only for finance sector or RBI/ SEBI/ or any other statutory/constitutional body can intervene in any sector in terms to ask someone to reduce their stake in a particular company?
How can goverment regulated body policing me in terms of investment? How much and where I should invest, should be decided by me. Isn’t it?
I’m not a big investor though but if I were a big giant of market how likely was it possible to get a notification from govt regulated body that now I can’t invest more in a particular company?

Bandan bank sanctioned for not following RBI norms on shareholding

What must be next in line “baby face” thinking now?:joy::joy:

RBI is now finally on a s-whooping spree after requesting, cajoling and intimidating but to no effect.