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

he later went on to buy for a simple thing — YES Bank wasn’t awarded the best mid-size bank by that publication. When they told him that it was the jury’s decision, he actually went and complained to the jury, only to be snubbed by them, a person privy to the conversations told me.

Again, he had a long stint with ASSOCHAM, which gave him access to rub shoulders with the who’s who of India’s power circle. ‘He used to make sure that if he came to any event, he was seated right next to the top minister. Else, he wouldn’t come,’ a media person who dealt with him as part of his events told me. Rana knew how to keep the limelight on him but also knew how to be subtle about it.

That is not all. Rana used to make judicious use of partnerships and sponsorships. He gave Rs 50 crore to a prominent business daily to act as a sponsor for its event. The idea was that he would get to rub shoulders with Prime Minister Narendra Modi at the stage, and ultimately build on his image in the business community.

And he never wanted to be audited about what he did about those partnerships. The business magazine of a Noida-based magazine-turned-TV-and-magazine conglomerate had a tie-up with YES Bank. The bank would supply them with surveys on small and medium enterprises. There wasn’t much editorial vetting of the content that was published. In 2014, a new editor took over at the publication. He started insisting on the disclosure about the methodology employed. The editor wasn’t willing to take responsibility of content that he wasn’t absolutely sure of. ‘How could I, as an editor, let them publish anything when I didn’t know anything about the procedure and methodology?’ the editor told me YES Bank and Rana Kapoor weren’t willing to relent and so the partnership was called off the next year.

Other than this, Rana also used innovative ways to gain access to places where hardly any other banker had been. Rana was appointed as consul for the Republic of Cyprus since 2002. In 2015, Rana was appointed as the consul general of the Republic of Cyprus, Maharashtra, at a time when a high-level delegation led by the President of Cyprus was planning to visit India in 2016 and strengthen bilateral ties. Now, judging by this, he would have got access to the diplomatic corridors of the country.

So, as we see, Rana used a gamut of ploys: from playing with the psychology of journalists to, advertisements, partnerships, sponsorships, litigations, ownership and literally everything else that it took to control the media. This is probably a lesson for many journalists for the next time they go out to report. It is just appalling when people consolidate disproportionate power and nobody bats an eyelid.

WHERE DOES BANKING GO FROM HERE?

As YES Bank’s bailout caused a political outcry across the country, the investigating agencies cornered Rana. And rightly so. But was Rana alone in this game? Never. He had accomplices who helped him achieve this. One of them is settled abroad. A couple of them are still in YES Bank, though there wings have been clipped. Yet another has moved to greener pastures with other private banks. While one Rana is gone, status quo prevails in the financial system.

As one my friends from the markets keeps telling me: ‘The new Lala (business owner) will replace the old Lala. But the DNA will remain the same.’ He is probably right. This is not the first banking failure in India, and this probably won’t be the last.

So, is the RBI going to act on this? The answer is yes. But the bigger question for the central bank is how to deal with it?

I spoke to a senior banker whose bank was part of the YES Bank bailout plan. According to the banker, the RBI will investigate, and there will be a lot of churning in the banking system internally. But the RBI will never make any of this investigation public. After all, the question of a systemic risk comes into play here. If the RBI goes public about the issue, the trust in the financial system will be dented further. The RBI is prudent enough to realize that the entire banking space rests on one pillar — trust. The day it’s gone, the financial system will come down like a pack of cards.

The bigger question is whether this bailout will be successful or not. While the RBI and SBI will be working hard towards it, the behaviour of the consortium of banks that bailed out YES Bank suggests something else. Kotak Mahindra Bank sold almost 9.4 per cent of the total shareholding that it picked up in the YES Bank bailout. Federal Bank sold 19.5 per cent of its entire shareholding; and IDFC First Bank sold 16 per cent of its total shares. The banks, which bought shares in YES Bank as part of the bailout, were allowed to sell only 25 per cent of their equity stakes each, with the remaining 75 per cent in a three-year lock-in period. All these banks have played safe. While they bailed out YES Bank, they made huge money on it as well.

So what happened immediately after the fall of YES Bank? There is a concept of ‘flight to safety’ in investing, where investors move towards safer assets in times of economic uncertainty. YES Bank was bailed out in the first week of March 2020. In the weeks that followed, the pandemic caused a global equity meltdown. In such market conditions, many panicked retail investors started selling their holdings. And where do they invest their monies in such a case? The money usually comes towards government bonds, gold and bank deposits. These three are considered safe havens in banking terminology. The thing with deposits is that they don’t give you a high rate of return like stock markets, but then they don’t even come with much of