Rana Kapoor’s Style Of Functioning Left Rs 54,000 Crore Hole In Yes Bank Balance Sheet: Report


The government had to ultimately intervene and bail out Yes Bank on March 6. Many of Rana Kapoor’s colleagues spoke about his style of functioning to Mint.

NEW DELHI – Yes Bank founder Rana Kapoor is now under police custody after being arrested on charges of money laundering. Kapoor is known for a flamboyant lifestyle and penchant for publicity.

Mint, Hindustan Times’ business publication, reported that Kapoor used to reward his bank’s top performers with so-called “Golden Pin Awards” and host lavish parties for them at his sea-facing residence in an upscale Mumbai neighbourhood. “He would only say – if you don’t invest big, you don’t grow big,” a senior person working at the bank told Mint.

When the going was good, Mint reported, Kapoor was known as the banker who would never say “No”. Under Kapoor, Yes Bank would even lend money to corporates who had been refused by other lenders. The bank grew 26 times in size, but so grew its balance sheet hole, which, according to the newspaper, was Rs 54,000 crore.

The government then had to intervene and bail the bank out on March 6.

As the government formulated a rescue plan for the beleaguered bank, Kapoor was questioned for 20 hours and ultimately, arrested, and his residence raided. Certain restrictions were put in place by the Reserve Bank of India (RBI).

These restrictions included limit on withdrawals to Rs 50,000 every 30 days which sent customers rushing to the bank’s ATMs and branches on Friday and Saturday in a desperate bid to retrieve their deposits.

The State Bank of India, the country’s largest lender, said on Saturday it was ready to for a 49 per cent stake in Yes Bank as part of a RBI-backed rescue plan. “Twenty-three potential investors have approached us to invest and they include some very good names,” SBI chairman Rajnish Kumar told reporters.

The RBI said Yes Bank’s weakened position was “largely due to inability of the bank to raise capital to address potential loan losses and resultant downgrades”.

India has been grappling with a liquidity crunch caused by the near-collapse more than a year ago of IL&FS, one of India’s biggest shadow banks – finance houses responsible for significant consumer lending.

Yes Bank’s total exposure to shadow lenders and developers was 11.5 per cent as of September, according to Bloomberg News.

It has been struggling for some time to raise fresh capital to free itself of an increasing pile of bad loans in order to quell worries about its viability.

The bank has over 1,000 branches and more than 1,800 ATMs across the country.