The Banker Who Crushed His Diamonds by Furquan Moharkan (read novel full txt) 📕

an extravagant person, someone who threw lavish parties for the borrowers. As his Samudra Mahal apartment seemed to be small to accommodate such a lifestyle, Rana coughed up Rs 1280 crore for an apartment block that sat on about 14,000 square feet, right next to Mukesh Ambani’s home Antilia. The plan was to demolish the structure and build a bungalow.

Known among the industry captains as the lender of last resort—a moniker meant for the RBI—Rana had lent to every other defaulter on the street, many of whom became insolvent after the debt bomb exploded in 2019. According to ED officials, who are now investigating the bank and Rana, YES Bank had lent to entities like Reliance Anil Dhirubhai Ambani Group, Essel Group, DHFL, Jet Airways, Cox & Kings, CG Power, among others.

Most of these companies had been under durable stress from quite some time, and Rana was willing to lend to them at 10 per cent upfront payment, which he was using to bulge his profits for the year the lending happened in.

Despite the bank being a publicly listed entity, where regulators—the RBI and SEBI—have strict governance metrics, all of which went for a toss. ‘The bank was run as a one-man show,’ said an executive who worked closely with Rana over the years.

While on one hand Rana was indulging in deep financial impropriety, many other executives, overtly and covertly, contributed to what came to be known as the India’s biggest banking mess. It is alleged that the accounting team never red-flagged the window dressing of the bank’s financials. But the bigger partner in crime was the team from the bank that was tasked with risk assessment. There is a famous joke about Rana Kapoor’s tenure at YES Bank, as explained by one of the bank’s executives: ‘There are two types of business models for banks in India—one is the HDFC Bank model, the other is the YES Bank model. In case of HDFC Bank, a risk team sets the metrics and the sales team gets the borrowers accordingly. In case of YES Bank, the sales team gets the exposure and then the risk team adjusts the metrics accordingly.’

The role of the risk team doesn’t end here. Despite exposure to a gamut of bankrupt and near-bankrupt entities, YES Bank, under Rana Kapoor, was showing profit in every quarter. How were they managing it? The answer lies in evergreening, a ploy to mask loan defaults by giving new loans to help delinquent borrowers repay or pay interest on old loans. Apart from Rana, suspicion also fell on a very senior executive from the risk team, who still holds the same position. ‘Initially, he (the risk team executive) was reluctant. Then he used to sit in Rana’s cabin every other day and evergreen the loan,’ an executive who is still serving in the bank once told me.

How was this syndicate working? There were, allegedly, at least three senior executives, including Rana Kapoor, who were trying to adjust the risk metrics of the bank, according to former employees of YES Bank. One executive was from the banking side and another from the risk team. One of the two executives left YES Bank just a month after Rana Kapoor’s exit. The other executive is still working at YES Bank and had access to the board even after Rana Kapoor’s exit. He was recently shifted from the coveted post he held after State Bank of India (SBI) took charge of the bank.

While their transactions might be shady, like Rana Kapoor these people too enjoyed their work and were workaholics. ‘He used to be more of a doer. He didn’t have that chalta hai attitude,’ a friend of mine who worked with one of these two executives later revealed. They were decision makers and were supported by a man whose focus was data analysis. The position that was given to this executive was way above his experience level. He used to help them with manipulating the underwriting process at the ledger level, one source told me.

Underwriting is the process that banks and other financial institutions use to assess the creditworthiness or risk of a potential borrower. During this stage of the loan process, the underwriter checks the borrower’s ability to repay the loan based on an analysis of their credit history, collateral and capacity.

What he essentially used to do is manipulate the expected cash flows on the basis of projecting high prospective growth from the ledger details. ‘They knew it was difficult to scrutinize the ledger details of the borrowers. Everyone would check it only on the surface level,’ a person who knew about this cabal closely told me. These allegations of evergreening became more obvious with the Mackstar fiasco in 2019.

According to the offshore investor Ocean Deity Investment Holdings—an erstwhile arm of DE Shaw and the 78 per cent-owner in Mackstar, the Indian joint venture (JV) where HDIL entities hold minority stake—the loans from YES Bank to the JV were not authorized by the majority shareholder. It is alleged that the money was transferred to bank accounts of other HDIL group companies, almost simultaneously, to repay loans taken by them from YES Bank. HDIL, owned by the Wadhawan brothers, was also allegedly involved in the PMC Bank scam.7

Another case in point here is an exposure to an infrastructure company, with interests in the cement business as well, based in north India. The company, which was already in stress by 2015, was a borrower with YES bank and had an overdraft facility in the bank. An overdraft helps to restore the cycle of rotation of the influx and out-flux of money runway. In late 2015, the company asked for more funds to the tune of Rs 1900 crore. But the money flow in the overdraft account had stopped by then. There was also a friendly non-banking financial company, which was allegedly getting huge sums of funds from YES Bank at cheap rates. Rana Kapoor also wielded a huge influence on the promoters of one of the