REFILE-UPDATE 2-Yes Bank woes deepen despite latest fundraising plan (Jan 10)

(Corrects Reuters Instrument Code in first paragraph of Jan. 10 story)

MUMBAI, Jan 10 (Reuters) - India’s Yes Bank has rejected $1.2 billion of outside investment and will launch a $1.4 billion share sale, it said on Friday after a board member’s resignation cast more doubt on the troubled lender’s future and sent its stock down 5%.

Yes Bank’s shares have plunged by about 75% in the past 12 months as non-performing assets have risen sharply, with investors further spooked by delays in the bank’s plans to raise urgently needed capital.

The bank has been talking about raising up to $2 billion in funds ever since the $1.2 billion offer from Canadian investor Erwin Singh Braich and Hong Kong-based SPGP Holdings was first announced in November.

From a long list of potential investors that Yes Bank had mentioned, only investments from Citax Holdings are still being considered, the bank said.

However, its woes deepened on Friday with the resignation of Uttam Prakash Agarwal, an independent board member and head of Yes Bank’s audit committee.

In a resignation letter seen by Reuters, Agarwal said there were serious concerns around deteriorating corporate governance as well as compliance failures at the country’s fifth-largest private lender by assets. Agarwal also said he had shared his concerns with the relevant regulatory authorities.

Yes Bank said it had noted Agarwal’s observations and would look into the allegations, which included a suggestion that Citax would be unable to invest at the level indicated by Yes Bank.

Shriram Subramanian, a corporate governance expert and founder of proxy advisory firm InGovernsaid, said the allegations against the bank were quite serious in nature, particularly as they come from the audit committee chairman.

“There is still a long way to go for investors to take the bank seriously,” Subramanian said.

“They may approve any amount of fundraising but I’m not sure who is going to infuse the capital for the bank to be resurrected.” (Reporting by Nupur Anand Additional reporting by Abhirup Roy Editing by David Goodman)