Categories: Business

The Untold Story: Deciphering the Unjust Web Weaved Around Yes Bank’s Rana Kapoor

For a visionary like Rana Kapoor, the former Managing Director and CEO of Yes Bank, sitting at the helm of the banking industry was once merely a dream. But his hard work, determination and perseverance made sure that Yes Bank never learned the meaning of the word ‘no’.

Rana Kapoor’s modus operandi was simple – never let down a fellow banker in need. Kapoor would always lend to large corporate group subsidiaries. The entrepreneur extended a helping hand to companies including Dewan Housing Finance Corp. Ltd, Infrastructure Leasing and Financial Services Ltd (IL&FS), Anil Ambani’s Reliance Group and Subhash Chandra’s Essel Group.

Kapoor’s extended run of success, however, was endowed to the fact that he gave equal attention to everyone. Also, while at the bank, he would lay a major focus on human resources and spent 60 per cent of his time with them.

Ironically, in March 2020, in a major turn of events, he was allegedly accused of money laundering. The charges against the banker were based on suspicious transactions in 2018 between DHFL and Yes Bank.

The Enforcement Directorate (ED) investigation agency hinted that the bank had subscribed to debentures worth Rs 3,700 crore during April-June of 2018. In the same period, DHFL promoter Kapil Wadhawan paid a kickback of Rs 600 crore to Rana Kapoor and his family members in the garb of a builder loan given by DHFL. Later, the agency furthered its claims stating that some Rs 30,000 crore loans were given while Kapoor was heading the bank. These loans were given to various entities and Rs 20,000 crore of it turned into nonperforming assets (NPAs).

However, the viability of such a scenario was never questioned. Looking at not just Yes Bank, but also other major private sector banks, a lot of conclusive evidences emerge.

As per the stats given for FY 2017 and FY 2018 – the NPAs for ICICI Bank stood at Rs 425.52 billion and Rs 540.63 billion respectively, for HDFC Bank at Rs 58.86 billion and Rs 86.07 billion respectively and for Kotak Mahindra at Rs 35. 79 billion and 38.25 billion respectively. While for Yes Bank, the numbers were Rs 20.19 billion and Rs 26.67 billion respectively.

Now, considering January 2019, the time at which Rana Kapoor parted ways with the bank, the market capitalisation of his institution stood at 53,000 crore.  Also, the bank had managed the lowest NPAs for 15 years and recovered 100 percent of companies like Kingfisher, Videocon, Religare and Bhushan Steel. Additionally, the establishment had zero exposure to RBI’s National Company Law Tribunal (NCTL). And in a span of 10 years beginning 2008, the share prices of the bank went from merely Rs 9 to Rs 404.

Questionably, at the time Rana Kapoor was stripped of his position by the Reserve Bank of India (RBI), the entire board of directors and 99 per cent of the shareholders approved him to continue. So, the statement that replacing him was vital to safeguard the rising NPAs of the bank, sounded absurd.

Also, while RBI justified its move by marking the satisfactory rating as ‘B’ for his last five years at bank, record books vow that not even a single divergence in NPA reporting was recorded.

As Kapoor got replaced, the bank plunged into further chaos. The change in leadership saw Ravneet Gill, former Deutsche Bank India chief executive, take over his position at the bank. But this antidote wasn’t the solution.

Gill, as reported, was never a team player. He was a lone worker, and would often have meeting with senior staff, listen to their views, but express little in return. This habit of his was completely different to the work environment set in by Rana Kapoor.

For Gill at Yes Bank, the first litmus test was to be the earning for the fourth quarter of FY19. Although, he did not have a major role with just two months in charge at the time, he was keen to use the earnings release to come clean and make a show of transparency.

However, after Kapoor left and the panic set in, the bank reported a net loss of 1,507 crore. Also, the NPAs, which remained under one percent for a better while under the former leader, rose to 3.22 per cent. His scatty decisions meant that the fear amongst people got real and even the RBI’s inspectors, who touted to catch the trouble that lay beneath the surface, were left with no answers.

In another judgment error, he quoted to the Economic Times in October 2019 that private equity funds and family offices are in talk with the bank. “The quality of investors and ability to invest serious money into the bank is unquestionable with respect to each one of these.” However, the absurd reality kicked in after he signed off an announcement in November 2019 for allotment of $2 billion.

The bank said that it had taken the note of interest expressed by several investors, while in reality a $1.2 billion potential offer was made by a self-proclaimed billion Erwin Singh Braich. And another $500 million was from Citax Holdings, a firm little known. Only hours after the information was made public, it came out that the bids were highly unlikely to be approved. This was because they were placed by non-professional investors, who wanted to hold a majority stake. The process, thus, sounded hoax and raised doubts over the people in charge at the bank.

Ravneet Gill was perhaps never able to fill in the shoes of Rana Kapoor. He was never the perfect choice, even if RBI had to take the call. Yes Bank’s founder was keenly obsessed with growth both for his bank and the economy, and in the last few years had led the bank to take the risks. But, bankers who had spent years….. knew he could manage it.

On the other hand, Gill had never known aggressive banking; he wasn’t even familiar with running a commercial bank of this size. Also, lacking in his armory was the ability to run a company listed publicly. He made errors and made the bait fall shrewdly on Rana Kapoor. In all hastiness to sound true, transparent and raise capital, his disability was seen by all. Yet, for all the wrongs that still prevail, only Rana Kapoor is unjustly blamed because RBI continues to boast the idea that NPAs rose unpredictably while he was in charge.

Srinivasan Vedam

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