Yes Bank Grapples With Legacy Issues Of Founder
- ByStartupStory | July 30, 2021
Yes Bank grapples with legacy issues of founder Rana Kapoor. Two years since his exit, as managing director and chief executive of Yes Bank, deals with private sector lenders have soured. The chances of recovery in most of these cases are slim as a large portion of collaterals such as land were grossly inflated in value against the loans given. According to close sources, most of these red-flagged accounts are in the bank’s real estate loan portfolio. The loans were given to finance construction, but the value of the underlying collateral, such as land, was grossly inflated. The borrowers include the Wadhawan family-promoted Housing Development and Infrastructure Ltd, which is also under investigation in the PMC Bank fraud case, where a similar modus operandi was used to siphon off funds through irrational loans.
In another instance, the bank’s current management classified a ₹400 crore loan given to a prominent Mumbai developer as fraud. The issue was resolved after the bank agreed to take a haircut on the principal through a one-time settlement. Another example is a ₹500 crore loan to Oyster Buildwell, an Avantha group company, which had negligible capital and income at the time of sanctioning the loan. Other controversial transactions include Yes Bank’s alleged dealings with a well-known asset reconstruction company (ARC) promoted by the kin of a prominent industrialist, where close to 80% of such bad loans were transferred to the ARC. According to a whistle-blower complaint, these bad loans were indirectly funded by the bank through near-zero cost loans given to the above mentioned ARC. Emails sent to Yes Bank with a detailed set of queries in this regard remained unanswered until press time on Thursday.
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