UPDATE 2-India’s Yes Bank names Deutsche’s Gill as CEO after central bank spat

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* Deutsche Bank India’s Gill to join Yes Bank by March 1

* RBI had demanded Rana Kapoor was replaced as CEO

* Yes Bank shares close 9.2 pct higher

* Q3 profit at 10.02 bln rupees, misses estimates

* Asset quality worsens, gross NPA at 2.1 pct (Adds operational metrics, comments from corporate governance expert)

Jan 24 (Reuters) – Yes Bank has hired the head of Deutsche Bank India Ravneet Gill as its new chief executive after the Reserve Bank of India demanded Rana Kapoor was replaced, lifting its shares.

Yes Bank’s stock had been dragged down by a long tussle with the central bank over Kapoor’s future, which had also led to several board departures.

Gill would join by March 1, Yes Bank said in a statement https://www.bseindia.com/xml-data/corpfiling/AttachLive/71c28f91-dc45-4c6a-9424- 6 c 4 8 f e 7 8 7 2 8 9 . p d f , adding that its board will meet on Jan. 29 to finalize who would lead the bank in the transition period.

The RBI had denied Kapoor an extension to his term twice last year without giving a reason and asked Yes Bank to find a new CEO by Feb. 1., exemplifying an increasingly assertive approach to tackling Indian banks’ bad debts.

“It is a positive for Yes Bank as the board has brought in a professional and an outsider CEO, who isn’t likely to be operating in the shadows of Rana Kapoor,” Shriram Subramanian, founder of proxy advisory firm InGovern, said.

“If Ravneet Gill gets a free hand to run the bank, it would be a positive for investors as far as corporate governance is concerned,” he added.

The announcement briefly drew investor attention away from a 7 percent fall in Yes Bank’s third-quarter net profit as it set aside provisions for its loan exposure to a struggling infrastructure conglomerate.

Yes Bank shares surged as much as 19.1 percent in their sharpest intra-day jump since Sept. 2013, before settling 9.2 percent higher.

Its net profit fell to 10.02 billion rupees ($141 million) in the three months to Dec. 31, missing analysts’ average estimate of 10.60 billion rupees, according to Refinitiv data.

Gross bad loans as a percentage of total loans, a measure of asset quality, rose to 2.1 percent by the end of December from 1.60 percent a quarter ago and 1.72 percent last year.

The lender has a funded exposure of 25.30 billion rupees to companies and special purpose vehicles of debt-laden Infrastructure Leasing and Financial Services (IL&FS) as on Dec. 31, of which it has classified 19.13 billion rupees as non-performing.

Yes Bank’s Senior Group President Rajat Monga, who was also mentioned as a candidate for the top job, said IL&FS’ debt resolution should start seeing results in 3-6 months.

(Reporting by Chris Thomas in Bengaluru; Editing by Muralikumar Anantharaman and Alexander Smith)