Yeah, he did, and that's the way you do these things.
You want him gone as captain so you take away T20 and ODI (you can legitimately point to team performance as the reason) and ask him to reconsider his position as Test captain, hoping he will resign, in which case you can announce it was his decision to step down as Test captain.
If he doesn't step down, in a season or two, you can point out how well the T20 and ODI teams are going under their new captain, and for continuity sake, you can then give the replacement the Test captaincy also.
It's the classic corporate move, if you don't have the balls or guts to fire someone outright, then take away their power until they resign. If they don't resign, continue to undermine them until you can fire them and no one will care because they don't have any power or influence anymore anyway.
I know why they're doing it, I just want to hear them justify it.