“Diamonds are forever,” tweeted a confident Rana Kapoor after he was ousted from the once shining private bank, an institution that he founded. These diamonds were Yes Bank’s shares, which he said he would eventually bequeath to his daughters and they’d stay in the family forever. Clearly, he spoke too soon. From over 15% stake that he held a decade ago, along with his promoter firms Yes Capital and Morgan Credits, today he owns a meagre 900 shares. That’s almost negligible, not even worth 60,000 at its current market price of 64. The final stake sale on November 12-13 came just days before RBI found that the bank had under-reported bad loans worth 32.7 billion. As new skeletons continue to fall out of the closet,there are still several questions about what went down at the bank. Outlook Business wrote an in-depth report about how he ran the bank, and what led to his descent. But there’s another story that has started coming to light, after a public interest litigation (PIL) filed against Indiabulls Housing Finance (IBHFL).
Bankers often look at innovative ways to generate higher fee income to bolster their topline. But Kapoor, who is under the regulatory scanner, generated fee income that did not find its way to the bank’s coffers, but to his own. This revelation was made public in a supplementary affidavit filed in Delhi High Court by the Citizens Whistle Blower Forum (CWBF).
A classic example of “you scratch my back, I scratch yours” seemed to be the relationship between Kapoor and Indiabulls. Essentially, the storied founder of Yes Bank extended loans worth 1 billion to 14 Indiabulls Group companies between 2009 and 2010 despite their weak balance sheets. Most of these Indiabulls companies have negative net worth, no income from business operations and huge accumulated losses. Even so, another 7.50 billion was extended to the group companies in a single financial year of 2019-19.
In turn, Kapoor’s family received huge amounts of money from the NBFC, of over 20 billion. They received that through seven companies, which are directly or indirectly owned by Bindu Kapoor, wife of Rana Kapoor (See: Under the table trade-offs). These companies have negligible or nil assets with no substantial business, according to the affidavit. It’s also interesting to note that Indiabulls itself was accused of siphoning of millions of rupees through multiple shell companies.
As per the affidavit, none of the seven companies ever filed charges with the ministry of corporate affairs against the loans taken and some of these companies have not disclosed these loans as mandated by law in their annual reports. Furthermore, these loans did not have any regular repayment schedule, but just had one single-bullet repayment at the end of the term, violating standard accounting procedures. While in certain transactions, the name of the lending companywas not disclosed,the petition claims that the forum has “confirmed from unimpeachable sources that the lending company is IBHFL.” (See: The money trail)
The forum cited recent cases of ICICI Bank, IL&FS, DHFL, PMC Bank, HDIL and Religare to illustrate how promoters and persons in charge of large NBFCs have looted public monies invested in them and siphoned it off through shell companies. The petition has come down heavily on the regulators for turning a blind eye to “these frauds happening right under their nose.” Meanwhile, Yes Bank is trying to move on from the shadow of Kapoor’s ‘misdealings’ with hopes of capital infusion.