yes bank
A watchman steps out of a Yes Bank branch in Mumbai, India, September 21, 2018REUTERS/Francis Mascarenhas

Yes Bank promoters Rana Kapoor and Madhu Kapur who are involved in a legal tussle since a long time have now initiated steps to reach an out-of-court settlement, Livemint reported.

Sources have told the financial daily that both camps have started preliminary talks to withdraw a long-drawn and bitter legal case against each other. A logical conclusion is likely to remove all the uncertainties surrounding the bank's succession plan which has been affecting the performance of its stock at Dalal Street. The sources also said that it would be in the best interest of the bank if both the promoters take a step back and call it peace.

"Rana Kapoor has approached Madhu Kapur and her family and both parties are willing to opt for an out-of-court settlement, keeping in mind the long-term vision that was set by Ashok Kapur and Rana Kapoor for the bank, which has grown into an institution today. Withdrawal of the legal battle will benefit the bank's board, shareholders, employees and ultimately the customers," told one of the sources.

The step has come as Reserve Bank of India (RBI) has directed Yes Bank to restrict the managing director and CEO Rana Kapoor's tenure till 31 January 2019. The order has made it tough for the bank's board to initiate a lengthy search of the replacement of its CEO.

The bank has a robust mechanism of selecting its new CEO that includes its complex articles of association (AoA) which, among other conditions, requiring both sides to agree to any new appointment to the board. Since a long time, the tussle between two promoters has hampered the smooth functioning of the Yes Bank's board.

The two promoters of the Bank had agreed on AoA in 2005, which was amended last in September 2017. Section 127 (a) of the bank's AoA clearly states that the two promoters will have a say in appointing any whole time director and the board shall follow the recommendation. It also stated that the board may appoint one of its members as the whole-time director subject to the consent from both promoters and then an RBI approval.