The happenings in Yes Bank have a very mysterious look about them. The only thing that stands stark naked is that thousands of crores belonging to unsuspecting depositors have been looted. As things stand today, it may turn out to be the biggest financial fraud of all times since India’s independence. It is obvious that this could not have happened unless all in the chain, bank promoters, senior bank management, auditors, borrowers, regulators from RBI and key government officials were all hands in glove. The ultimate sufferers are honest tax payers and retired people who trusted the bank with their savings.
There are a few obvious questions that seem to have no answers as of now. DHFL is a scam tainted company that has been under investigation for over a year now. Surprisingly while its links with many other banks and institutions are in the news, its connection with Yes Bank never surfaced. It seems to have been put under wraps in a deliberate manner. One wonders what was the compulsion for the investigators to do so. It is only now when Yes Bank is being investigated that the link is out in the open.
Yes Bank was reporting a growth rate of about 30% for years continually when the banking industry standard was only 10-12%. Should this not have flagged some concern that warranted a detailed scrutiny by the regulators? But nothing of this kind happened. Did they deliberately ignore this issue and let things be?
Indian corporate sector has thrown up a club of Bad Boys over the years who seem to have exceled in the art of taking huge advances from banks and then defaulting. In many cases their business models hardly supported the magnitude of the bank loans that they received. The club includes known defaulters like the ZEE group, Essel Group, Reliance (ADG) Group, DHFL, India Bulls, UB Group, Geetanjali Diamonds and JET Airways. Despite their defaults in servicing of loans, the members of this club managed fresh loans from other banks at will. As far as Yes Bank is concerned, it seems to have welcomed nearly every member of this club willingly to disburse loans with very little collaterals and scrutiny of their businesses. Just ten such business houses have loans of over rupees thirty-four thousand crores from Yes Bank. Were the regulators at RBI and Board members of the bank sleeping while all this was going on at Yes Bank?
As far as Anil Ambani group is concerned it has over Rs. 12,800 crore loans from Yes Bank that are presumably under stress. His office had issued a statement last week saying that its entire debt from the bank was fully secured and was availed in the ordinary course of business. It further qualified that ‘Reliance Group is committed to honouring repayments of all its borrowings from Yes Bank Ltd through its various asset monetisation programmes which are all at advanced stages.’ The same Mr Anil Ambani’s lawyers had stated in London court a few weeks ago that Mr Ambani was bankrupt and his net worth was down from $7 billion in 2012 to only about $89 million currently. They further told the court that if his liabilities are taken into account then his net worth was Zero. If that be so, one wonders how does his group assure that they will honour the loans taken from Yes Bank.
Many of the defaulters of Yes Bank are avoiding attending the investigations at the Enforcement Directorate by reportedly citing vague reasons like spread of Coronavirus to looking after one’s sick sister. The reality is clear, all of them are buying time and hoping for the dust to settle down so that their lawyers and cronies can paralyze the probe. In the meanwhile, they will continue to find fresh pastures and more banks to loot public money. If things get too hot for a few, they can always find ways to leave the country for safe havens.
As far as Mr Rana Kapoor, the promoter of Yes Bank is concerned, the less said the better. Between him and his family he seems to have found many innovative ways to park the loot that is primarily depositors’ money. With prime properties spread around the globe, is there any doubt about what he has done and why he has done? Will the ED be able to link all such properties to the money that has been siphoned off from the bank? Chances are that they will not since the web created tends to be so complex that tracing becomes impossible. In such a case, if Punjab and Haryana High Court judgement delivered 06 March 2020 becomes a precedent, then none of these properties will ever be attached – unless the ED can prove beyond doubt that the same were financed by ill-gotten wealth directly linked with the alleged criminal activity for which Mr Rana or his family have been accused. Net result will be that Mr Rana or his family will not lose most of their assets. That is Indian law for you – which seems more in favour than against the scamsters.
In the reconstruction process, Rs. 8,900 crores of AT-1 (Perpetual) bonds have been written off by SBI and RBI combine without batting an eyelid. In most developed nations AT-1 bonds, that are deemed as quasi equity, are hardly ever issued to retail investors since terms and conditions of such bonds are complicated and unfavorable for them. In India this is not followed and a large part of the bonds are held with retail investors. Many retail investors buy these bonds from secondary markets where no bond certificates with details of terms and conditions are issued. These are just credited to their demat accounts like equities. Many retired people opted for these bonds because of the marginally higher interest rates on offer. Today their retirement planning has gone totally awry because these bonds stand extinguished (zero value).
In principle, an AT–1 bond is a loan by the investor to the bank. If that be so how can it be treated even below equity and written off? Was this done to make investment by SBI and others more attractive at the cost of bond holders? The new investment is priced at Rs 10.00 per share of paid up value of Rs 2.00 with a lock in period of three years. Even if Yes Bank share trades at Rs 20.00 after three years, the investing banks will double their money, something that they can never do in their normal operations. So, these investors are perhaps safe on most counts unless the bank fails again which is unlikely. In this scenario it is hard to understand why AT-1 bonds have been written off totally.
All this gives an impression that perhaps there was a deliberate effort to suppress the goings on at Yes Bank. The speed at which YES Bank issue has been resolved, while being creditable, is unprecedented in Indian history. Could it be that a sincere and honest investigation at Yes Bank may open a can of worms that may result in an unprecedented exposure of the financial sector in the country? Will the country ever know the real story behind this fiasco? Something is amiss here that points to a big coverup operation, possibly at the behest of the government. The question is why and for whom?
DISCLAIMER : Views expressed above are the author’s own.