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

of anonymity, ‘They gave me some kind of assurance, but I stopped going to meetings physically afterwards. My organization was asking me questions. There was mistrust.’

It was clear by now that the bank was unable to raise funds. On 22 January, I got calls from one of the two teams handling the media, pressing for carrying a release that they had sent that day, which according to them was a novel idea. In that press note, the bank said that it had ‘recently launched XL-rate savings accounts, in line with the bank’s endeavour of offering value-added products and initiatives, curated especially for customers looking for higher returns. This smart savings account transfers balances above Rs 1 lakh from the saving account automatically into a fixed deposit (FD), thereby offering a higher interest rate on the surplus funds. The amount in excess of Rs 1 lakh in savings account will be swept out into a FD for a tenure of one year, one day (minimum FD amount of Rs 25,000).’

I sensed that something was off. The bank was clearly staring at a collapse and its deposit base was eroding. How on earth was it promising higher returns to investors then?

Well, Dalal Street saw it as a desperate move by the bank to shore up its deposits, so that it could delay supposed fund-raising a bit more. Such was the condition of the bank by this time that while everyone was talking about it, no one was willing to talk about it either. While most analysts were tracking the bank, no one was willing to come on record. One prominent brokerage house told me in January: ‘We have barred our analysts from commenting on YES Bank.’

Interestingly, all these announcements were more or less placed near future and options expiry date. In the Futures and Options F&O market parlance, ‘expiry date,’ or simple ‘expiry,’ means the last day that an options or futures contract is valid. Once an options or futures contract passes its expiration date, the contract is invalid. And YES Bank stock is an F&O stock as well. Many in the markets saw it as a way of manipulating stock prices. That is why the regulators and exchanges conveyed to YES Bank their displeasure by the end of December.

It was during this time that short positions on the bank jumped manifolds with many big-ticket investors feeling that they would make a huge fortune if the bank crashed. Short sellers bet that the stock they sell will drop in price and the difference will become the investors’ profit. Many of these short sellers, on the day YES Bank failed, made huge and unimaginable fortunes. Unfortunately, these were the people who were blamed by YES Bank for all the mess, despite the fact that these short sellers probably knew what was coming, even if the bank refused to accept it.

THE MESS GOT REAL

By January 2020, when it was clear that things were clearly headed south, Uttam Prakash Agarwal, the then chairman of the audit committee, resigned. But the way he resigned led to a lot of muck surfacing.

In his resignation letter to then chairman of the bank, Brahm Dutt, Agarwal said, ‘There are serious concerns as regards deteriorating standards of the corporate governance, failure of compliance, management practices and the manner in which the state of affairs of the company are being conducted by Ravneet Gill — MD/CEO, Rajiv Uberoi — Senior Group President Governance & Controls, Sanjay Nambiar — Legal Head and Board of Directors.’

While informing the public about the exit of the director, the bank said that it was reviewing a ‘fit and proper case’ against Agarwal. ‘In this respect, the bank had obtained legal opinions from eminent jurists. These opinions were to be considered by the Nomination and Remuneration Committee of the board (NRC)/ the board of the bank in their meetings scheduled for today, i.e. January 10, 2020. However, prior to the commencement of the proceedings of these meetings, the bank received the resignation of Agarwal,’ the bank said.

The bank was indeed asked by the central bank to review Agrawal’s directorship. The RBI had asked YES Bank to re-examine the ‘fit and proper’ status of the lender’s audit committee chairman after it was found that he had failed to disclose details of criminal cases filed against him, Livemint had reported on 24 November.

In fact, some of the bank insiders told me that Agarwal was allegedly doing this on Rana Kapoor’s behest. In one such conversation, he said, ‘The bank’s management is deliberately doing it so that they can sell the bank to Uday Kotak.’ This struck a chord with the blame-game technique YES Bank, in Rana Kapoor’s last days of leadership, had adopted.

Amid this saga, an executive of one of the institutional investors at the bank told me that it was board-room muck playing out in public as everyone was trying to steer clear of what would be known as India’s biggest banking failure till date. ‘You see, everyone is trying to save themselves. And in all this we are seeing dirty linen being washed in public.’

Interestingly, this was not the only letter by Agarwal that alleged malpractices by the bank. The other letter that was shot out on that day was addressed to RBI governor Shaktikanta Das. The letter alleged that the bank was misleading everyone on the capital raising, governance lapses, evergreening of loans and misrepresentation of facts. But one allegation that brings the role of the RBI an as administrator into question is that the letter alleged a 25 per cent erosion in the deposit base in the December 2019 quarter — information which was sent out to me by one of the bank’s executives. Incidentally, in her press conference after the fall of YES Bank, on 6 March, the finance minister did mention these letters.

Internal red flags were raised by Agarwal in his letters to Brahm Dutt in the beginning of January. By the end of the month, Agarwal had shot