Mumbai: The arrest of Yes Bank Ltd co-founder Rana Kapoor by the Enforcement Directorate (ED) on Sunday lends credence to allegations of kickbacks and round-tripping of funds by Kapoor.
The primary allegation against Kapoor is related to Doit Urban Ventures, a company belonging to his family. The company received ₹600 crore from Dewan Housing Finance Corp. Ltd (DHFL) allegedly in return for Yes Bank not labelling loans to DHFL as non-performing assets (NPAs). The directors of Doit Urban Ventures are Rana Kapoor’s daughters Radha Kapoor Khanna and Roshni Kapoor. In mounting trouble for the family, the Central Bureau of Investigation (CBI) has also initiated a probe into the matter.
A Mumbai court sent Kapoor to ED custody till Wednesday. The ED has estimated the size of the crime at ₹4,300 crore, a figure which was rejected by Kapoor’s lawyers.
While CBI officials declined to give details of the nature of the probe, a person familiar with the development said the agency is investigating if Kapoor had entered into a criminal conspiracy with Kapil Wadhwan, a former chairman and managing director of DHFL, for extending financial assistance to the home financier through Yes Bank.
In the wake of Kapoor’s arrest, a lookout circular had been issued by ED against his wife and daughters as well. A lookout circular is typically issued by a probe agency when a case is filed against an individual. The circular is then forwarded to airports.
Kapoor’s arrest by ED came within two days of finance minister Nirmala Sitharaman saying she has asked the Reserve Bank of India (RBI) for a report on what caused the problems at Yes Bank. “I have asked RBI now to go into assessing what has caused these difficulties for Yes Bank and also clearly identify the role played by various individuals in the problem; in creating the problem and not so comprehensively addressing the problem," said Sitharaman.
A PTI report said, Kapoor was held under the provision of the Prevention of Money Laundering Act around 3am as he was allegedly not cooperating with probe agencies. The report cited unnamed officials to say Kapoor’s wife Bindu Kapoor and their three daughters are allegedly linked to some firms to which the suspected “proceeds of crime" have been traced. As on 31 March 2019, Morgan Credits Pvt. Ltd, another Rana Kapoor family company, held 100% stake in Doit Urban Ventures. According to filings in the registrar of corporates, Doit posted a loss of ₹48.76 crore on revenue of ₹59.36 crore. In the previous fiscal (FY18), it did not have any revenue from operations but had other income of ₹43.55 crore and a net profit of ₹3.44 crore. Interestingly, in FY19, finance costs of ₹63.68 crore was higher than total revenue.
Doit Urban Ventures has 10 subsidiaries, including DoIT Smart Hospitality (India) Pvt. Ltd, DoIT Smart Sports Infrastructure (India) Pvt. Ltd and DoIT Real Assets (India) Pvt. Ltd.
Meanwhile, directors of Morgan Credits Pvt. Ltd—holding firm of Doit Urban Ventures—are Rana Kapoor daughters Rakhee Kapoor Tandon, Radha Kapoor Khanna and Roshni Kapoor. Morgan Credits, which owned a 3.03% promoter stake in Yes Bank at the end of FY19 exited last year. A report by Care Ratings on 2 December said until 30 September, Morgan Credits was a promoter entity and received dividend income of ₹14.5 crore in the first six months FY20.
Going by what Sitharaman said on Friday, the undoing of Yes Bank could be attributed to loan exposures to some stressed corporates, including Reliance Anil Dhirubhai Ambani Group, Essel Group, Infrastructure Leasing and Financial Services Ltd and DHFL. A person close to Kapoor said he was the lender of last resort for many stressed borrowers and entered deals where others did not venture.
An Anil Ambani group firm, Reliance Infrastructure—which in January and February defaulted in repaying loans to Jammu and Kashmir Bank, Srei Equipment Finance Ltd and Yes Bank—made an interesting disclosure on 3 March.
Of total borrowings from financial institutions of ₹3,871 crore (on 31 January), ₹3,627.19 crore or 94% was from Yes. Among three financiers, Yes Bank’s repayment tenure was the longest at 5-10 years, compared to 5.25 years of J&K Bank and three years for Srei Equipment Finance. As of September, total bad loans were ₹17,134 crore or 7.39% of gross advances. While gross slippages or addition to the bad loan pool stood at ₹5,950 crore in Q2 of FY20, it recovered and upgraded loans of ₹870 crore in the same period.
In a response to website Print, Kapoor said: “I was founder of the bank. But I have had nothing to do with it for last 14 months. You should talk to (chairman) Brahm Dutt and (CEO) Ravneet Gill. They are the ones responsible for whatever has happened in the last one year."
Meanwhile, RBI on Sunday assured depositors their money is safe. “Concern has been raised in certain sections of media about safety of deposits of certain banks. This concern is based on analysis which is flawed. Solvency of banks is internationally based on capital to risk weighted assets and not on market cap," RBI’s official handle tweeted.
Owners of Yes Bank’s additional tier 1 bonds are staring at huge losses after RBI decided to completely write off the bank’s AT1 capital.
Shaswati Das from New Delhi contributed to this story.
