Madhu is estranged sister-in-law of Yes Bank CEO Rana Kapoor, who has 13.64 per cent stake in the bank.
Earlier this month, the Bombay High Court had directed Rana Kapoor and Madhu Kapur to amicably resolve a dispute relating to latter's right to nominate directors on the bank's board.
"Madhu Kapur being successor of Late Ashok Kapur cannot be considered as Indian partner or India promoter and accordingly, cannot inherit the rights under Articles of Association or the status of Promoter of Yes Bank," it said in a statement.
The board of Yes Bank had met last week where this decision was taken by its members, the bank added.
"Since the advocates of Madhu Kapur as a start up to any amicable resolution require the bank to recognise her rights as Indian Partner, the board is not in a position to accede to any such request for the reason mentioned above," it said.
Last year, Madhu Kapur, widow of Yes Banks co-founder and promoter Ashok Kapur, had filed a suit in the Bombay High Court alleging that Rana Kapoor attempted to deprive her and her children Shagun Kapur Gogia of a place on the board.
Rana Kapoor and Ashok Kapur jointly founded the bank in 2004. Ashok Kapur was killed in the Mumbai terrorist attack of November 2008. Incidentally, Kapoor is married to Madhu Kapur's sister.
"While the Late Ashok Kapur, was indeed a co-promoter with established bonafide, basis the deliberation and expert advise, it is abundantly clear that financial family successors do not automatically become part of the promoter Group given the regulatory criteria for bank promoters," it said.
"We are talking about a bank which is a public institution. Banking is not a family business and Rana Kapoor cannot take a decision on this matter on is own as he is obliged to work in fullest consultation with the Board of Directors whose decisions and consultations are in accordance and fullest conformity with the Banking Regulation Act," the statment said.