NEW DELHI: A number of loans granted to stressed non-banking financial companies (NBFCs) by Yes Bank have come under the scanner of investigative agencies, said people with knowledge of the matter. Cofounder Rana Kapoor was arrested by the Enforcement Directorate on Sunday after he was booked by the Central Bureau of Investigation (CBI) on Saturday. Besides Dewan Housing Finance Corp. Ltd (DHFL), loans running into several hundreds of crores of rupees were given to various stressed NBFCs, real estate firms and entertainment companies when Kapoor was in charge, said the people cited above. These include a real estate giant with negative credit rating that was granted loans close to the time of the DHFL borrowing, they said. Also being looked at are loans to a big entertainment company, the leadership of which is believed to have been close to Kapoor, they added. Investigators are examining whether kickbacks were paid through shell companies, the people said.
Meanwhile, former CEO of Yes Bank Ravneet Gill was questioned by ED on Monday. A preliminary perusal of the loans given by Yes Bank reveal that disclosures to regulators, especially the Securities and Exchange Board of India (Sebi), were “patently false,” said one of the persons cited above. The role of credit rating agencies is also being probed. “The loan book clearly shows that the credit rating agencies did not bother to do any background check, prepare risk reports or prepare performance forecasts of the companies in question,” he said. “It is appalling that despite there being a proper mechanism in place no institution--from regulators to credit rating agencies--red flagged the blatant fraud,” said a top official. “This clearly points to systemic complicity and accountability of all those who turned a blind eye to this needs to be fixed. Loans given by Yes Bank to entities with negative rating reveal that a sinking ship was trying to save another sinking ship.”
Sources indicated that more cases may be registered against Yes Bank if any further quid pro quo and criminality are uncovered in the loans granted to the stressed NBFCs and other companies. Meanwhile, the role of an expert who “overvalued” agricultural land pledged by one of Kapoor’s companies, Doit Urban Ventures, against a loan from DHFL is being examined by the ED. The agency is likely to examine the expert and the DHFL management, which accepted the “overvalued” security, said one of the persons cited above. Sources also indicated that after examining the roles of valuation experts, auditors and DHFL management, Kapoor may be brought face to face with DHFL chairman Kapil Wadhawan, who was arrested by ED this January on charges of money laundering. According to the ED investigation, Yes Bank sanctioned a loan of ₹3,700 crore to DHFL in exchange for which the latter gave a loan of nearly ₹600 crore to a company in which Kapoor’s daughters are directors. It is alleged that Kapoor floated over a dozen companies to receive kickbacks for loans sanctioned by Yes Bank. The ED has alleged that Kapoor and his family members purchased several properties with the alleged kickbacks. “It is apprehended that Rana Kapoor has also similarly misused his official position in several other transactions and obtained illegal kickbacks directly or indirectly through entities controlled by him or his family members,” the CBI said in its first information report (FIR), which was made public on Monday. Kapoor’s wife and three daughters have also been named in the FIR along with DHFL and its promoter Wadhawan. “Loan of ₹600 crore was sanctioned by M/s DHFL to M/s Doit Urban Ventures (India) Private Limited on the basis of a mortgage of a substandard property having very meagre value and by considering its future conversion from agricultural land to the residential land,” according to the FIR. DHFL has “not redeemed the amount of ₹3,700 crore invested by M/s Yes Bank in its debentures till date.” Yes Bank also sanctioned a loan of ₹750 crore to M/s RKW Developers Pvt Ltd, a DHFL group company, for its Bandra reclamation project, the FIR said. This was siphoned off by Wadhawan—it was transferred to DHFL without any investment being made in the Bandra project, it said. The FIR said Kapoor “obtained undue pecuniary advantage from M/s DHFL in the matter of investment in the debentures of M/s DHFL by Yes Bank through the companies held by his wife and daughters.”
March 10, 2020