 Hello and welcome to NewsClick. I am Poranjoy Gohar Thakurtha. We continue this series of conversations with independent analyst Hemindra Hazari. The first series had we discussed the ICICI Bank, the ILNFS, non-banking financial company. We looked at Kotak Mahindra Bank, then after we looked at Yes Bank. And in this series of conversations, we've already had a look at HDFC and the ILNFS Group, as well as Axis Bank, formerly UTI Bank, set up by the Unit Trust of India. We're going to do a follow-up to what has happened at Yes Bank and whether to use Mr Hazari's words, Yes Bank's new CEO should not be a Yes Man. Give us a little bit of the background, Mr Hazari. I mean, tell us a little bit. You talked about this great Shakespearean drama that played out because of Mr Rana Kapoor and now that Mr Rana Kapoor stepped down as the CEO and the founder of the bank at the end of January. And with effect from the 1st of March, we have Yes Bank with a new chief executive officer, Mr Ravneet Gill. So give us a little bit of background and then tell us why Mr Gill, the new head of Yes Bank, should not be a Yes Man. See, the whole problem and the issue with Yes Bank was that there was a crisis of leadership. The Reserve Bank of India did not consider Mr Rana Kapoor fit and proper for him to continue with the fresh term as the CEO. Now, in all promoter-driven enterprises, the CEO plays a very important role if he's the promoter. And naturally, if he's been asked to step down by the regulator, it creates a crisis for everybody concerned because these are all single individual-driven enterprises. And what happened in Yes was not only did the RBI tell him to step down, but the board subsequently, you know, they removed their head of their audit committee, they had an independent director, he stepped down probably taking, you know, they held him accountable for again two successive years of misreported accounts. Then you had another independent director who had been appointed early of 2018 who resigned and in his resignation letter, he said he was dissatisfied with what he was seeing in Yes Bank. Who are you talking about? This is, I think, Mr Chandrasekhar of who was the earlier? Now you have new persons. Now you have new persons. Mr Maheshwar Sahu is a former bureaucrat, Mr Anil Jaggya, formerly from the HDFC Bank. And these are the two independent directors and Mr Ashish Agarwal, the chief risk officer, is also, he's the executive director. But I, yeah, please, please continue the story. So the concern was that, you know, the leadership which the markets, the banks, so on, middle management, everything was comfortable with all being removed. And therefore, who would take over that? And plus there was this promoter struggle also going on between Rana Kapoor and... And a section of his family. And a section of the other promoter, Mr Ashok Kapoor's family. So that also, all these, plus we have the RBI who was very clearly dissatisfied with all that was going on. And in this context, you know, the market was awaiting that who will this new leader be. And the markets bounced. The shares of Yes Bank bounced when news came that Mr Gill, Ravneet Gill was going to be appointed as the bank CEO for a three-year period starting the first of March. Exactly, because I had also argued that in such a case, you require a CEO from outside who's also a hardcore commercial banker. And in this election, it appears that both these conditions, which I believe, you know, should have been there in the future CEO have been met. And therefore, I think even the market thought that this will now be, you know, the previous chapters closed. And this new chapter will begin of Yes Bank. Mr Hazadi, I'd like you to talk a little bit about why you believe Yes Bank is in the crosshairs of the Reserve Bank of India. And on the 13th of February, the bank issued a press note saying that the Reserve Bank of India's risk assessment report for the year 31st March 2018 showed that there were no divergence in terms of the bank's profits, the net profits, the quality of its assets were in full conformity with the norms of the Reserve Bank of India, which was unlike what had happened in 2016, 1516 financial year and 1617 the financial year. Now, you yourself have pointed out that in 1718, there were two corporate accounts, Reliance and Naval, headed by Mr Anil Ambani and Maddox Fertilizers that were shown as being standard, whereas most banks that had exposure to these same companies classified their accounts and their assets as non-performing. I'd like you to explain what you mean. See, what I detected in FY 2018 was that these two, which of its Reliance Naval was a 450 crore exposure round of Yes Bank. It had classified the account as performing while practically all the banks in the Reliance Naval Consortium had classified that account as non-performing. Therefore, in my opinion, there was very high probability that when the RBI did its inspection that they would also classify this account as non-performing. And similarly with Metix, although Metix's exposure was very small. Therefore, in my opinion, I thought the probability was higher that in FY 18 as well, it would qualify for this divergence, which means that you can have more divergence than RBI, but has to be less than 15%. Suppose it's 14% divergence, it will not qualify for being disclosed as divergence. I'd like you to explain something in a simpler language you can. You're a financial analyst, you understand these things better. What I call the Reserve Bank of India's Risk Assessment Report, R-A-R. On the 13th of February, Yes Bank says, we adhere to the RBI's norms. And then two days later on the 15th of February, the same bank issues another note for the press and the media saying that the Reserve Bank of India was very, very upset, had hauled it up or pulled it up because they had publicly disclosed this Risk Assessment Report, which was meant to be a confidential document, a confidential report, and in violation of the guidelines of the Reserve Bank of India. Now, you have wondered why did the RBI admonish Yes Bank when they did not do the same thing when other banks, such as HDFC Bank, Axis Bank, Kotak Mahindra Bank, when they had also cited their Risk Assessment Report to show that there was no divergence from what they disclosed in their accounts with the norms stipulated and specified by the Reserve Bank of India. Kindly explain this issue. Now, this Risk Assessment Report is a very, very comprehensive report. It not only discusses whether the accounts are conforming with RBI norms, but it discusses a whole host of things. It goes into whether technology aspect, it even goes into succession planning. All this is very comprehensive report and divergence is only one aspect of the report. Now, the entire report is marked private and confidential. However, market practice till this was that when there was no divergence, certain banks, and I mentioned those banks, not only that they... HDFC Bank, Axis Bank, Kotak Mahindra Bank. Right. Not only that they orally conveyed but it was actually disclosed in either their advertisement when the results come out or in the transcript with analysts. So, it became public. It had become public. So, therefore, I believe Axis Bank... And there was a concern in the market. I also had that concern that for FY 2018, you know, Yes Bank may again be, you know, come under divergence. So, when this concern was there and there was also a concern that Rana Kapoor did not get the extension, did not get his term renewed because RBI may have found that again for the third year, there could have been divergence. A presumption or a speculation. Although, in my view, two years consecutively, no CEO should be able to continue, should be allowed to continue. So, given this concern in the market when they got this report, they decided to go public on it. Otherwise, you know, it may have leaked unofficially and therefore they thought because they had seen what other banks were doing, they thought it was all right. Now, obviously, from the reserve bank of point of view, it was not all right. And they specifically admonished Yes Bank for, you know, specifically issuing a press release saying, while the other banks had never specifically issued a press release. Okay, so, all right. So, you are taking a somewhat nuanced view about what had happened. Tell me, earlier in our earlier conversation, you had talked about how the HDFC bank hadn't exactly been responding to your questions. I understand the Yes Bank has been far more, what should I say, forthcoming in responding to analysts' queries, including yours. Is that correct? No, that was a very pleasant surprise because in terms of Yes Bank, I have been far more critical and my reports have been far more frequent than as compared to HDFC where they have just done about one report which could be critical. But I've noticed that with Yes Bank in particular, right from day one when I send them a questionnaire, they're extremely professional, extremely responsive, they'll come loaded with their data with their version of the facts. And, you know, no threats, no disgruntlement, you know, it's like, this is our view, please consider it. I think that's the way a professional organization should be managed. And it speaks a lot about the institution which can accept criticism. I think that's very important. I think that's the important point that you're driving at. Some organizations, more than others, are more tolerant and receptive to criticism which is how we can agree or disagree how constructive or how destructive that criticism is. Very true. I think it reflects on the maturity of the individuals and the maturity of the institution. Okay. Thank you very much, Mr. Hemendra Hazari for giving us your views on Yes Bank and time alone will tell whether its new chief executive officer, Ravneet Gill, will not just be a Yes Bank but is able to get Yes Bank out of the crosshairs of the regulator, the Reserve Bank of India. Keep watching NewsClick, you know, this is the only portal, the only YouTube channel where you're going to get the kind of very, very critical and perceptive analysis and commentary on the working of private banks in India. Now, we conclude at this juncture, this conversation, but there'll be one more conversation with Mr. Hemendra Hazari which looks at the bigger economic and political issue. Every now and then we hear the problem with India's banking sector is that we need to privatize the public sector banks. We need to consolidate public sector banks. Is that the way forward? Keep watching NewsClick and thank you for being with us on this conversation.