The turnaround story executed, Yes Bank is in the process of forming an alternate board more than two years after the government laid out a plan to bail out the private lender with the State Bank of India (SBI) as the lead anchor.

The bank, which was hit by lending malpractices, returned to profit in the financial year 2021-2022 after suffering heavy losses for two consecutive years.

"On the back of Yes Bank’s turnaround and having achieved significant progress... the board of directors appointed under the reconstruction scheme, have recommended to its shareholders, the formation of an alternate board," the lender said.

In contrast to the current board which operates under the ambit of the reconstruction scheme, the alternate board will operate under applicable laws and regulations.

The government had notified the Yes Bank Reconstruction Scheme on 13 March 2020 as it was concerned with the sinking of the bank due to governance issues and lending mismanagement.

Yes Bank said its existing board of directors has recommended the constitution of a new board for approval of shareholders at the Annual General Meeting (AGM) scheduled on 15 July.

SBI, the largest shareholder, has proposed Prashant Kumar to continue as the managing director and chief executive officer of the bank for three more years, which will be subject to approval of the alternate board, the Reserve Bank of India (RBI) and the shareholders.

Kumar, who was the chief financial officer of  SBI then, was appointed as the administrator of Yes Bank and later given the role of MD & CEO of the troubled bank.

The proposed new board will consist of nine members including Kumar, Atul Malik, Rekha Murthy, Sharad Sharma, Nandita Gurjar, Sanjay Kumar Khemani, Sadashiv Srinivas Rao, T Keshav Kumar and Sandeep Tewari.

Chairman Sunil Mehta, Mahesh Krishnamurti and Atul Bheda would not be a part of the new board, "having overseen the significant turnaround of the bank in record time and having achieved the primary purpose for which they were mandated under the reconstruction schme", Yes Bank said.

Yes Bank’s existing board has four directors, including Kumar, chairman Mehta,  Krishnamuti and Bheda. It also has two SBI nominee directors (officers of SBI) and two RBI-appointed additional directors.

The term of the two additional directors - R Gandhi and Ananth Narayan Gopalakrishnan— will continue up to 23 March 2023 or till further orders, whichever is earlier.

Yes Bank, which had to be bailed out in March 2020 with capital infusion from a number of other banks, said it achieved key milestones since the implementation of the reconstruction scheme, including a full year profit in FY22; nearly doubling of deposit book from Rs 1.05 lakh crore to Rs 1.97 lakh crore (March 2022), increase in retail/MSME share in the balance sheet to 60% from 44% and reaching a CASA (current account savings account) of over 30%.

The bank also raised Rs 15,000 crore equity capital in July 2020 through one of the largest public issues and improved the CET1 ratio to 11.6% from 6.3%.

Yes Bank said the focus has moved from consolidation of the balance sheet to growth. In FY22, the bank's loan book grew by nearly 9% with gross disbursements of about Rs 70,000 crore across all segments.

"Bank has undertaken multiple initiatives to review and make necessary changes to its governance frameworks and processes with a key focus on the credit underwriting policies and practices," it said.

It maintained leadership in digital payments with highest market share in UPI as one of every third digital transaction is processed by Yes Bank infrastructure.

"Yes Bank today accomplishes a significant milestone of coming out of the reconstruction scheme by initiating the process of formation of the alternate board," Mehta said.