YES BANK GRAPPLES WITH LEGACY ISSUES OF FOUNDER

MUMBAI: Two years after Rana Kapoor’s exit, Yes Bank continues to grapple with the legacy of its founder—a plethora of loans given out in an alleged quid pro quo where the bank bypassed institutional credit checks.

Since founder Kapoor’s departure as managing director and chief executive of Yes Bank, several of these large exposures of the private sector lender have soured. People directly aware of the matter said the chances of recovery in most cases are slim as a large portion of collaterals such as land were grossly inflated in value against the loans given.

According to the people cited above, most of these red-flagged accounts are in the bank’s real estate loan portfolio. The loans were given to finance construction, but the value of the underlying collateral, such as land, was grossly inflated.

The borrowers include the Wadhawan family-promoted Housing Development and Infrastructure Ltd, which is also under investigation in the PMC Bank fraud case, where a similar modus operandi was used to siphon off funds through bogus loans. The issue was resolved after the bank agreed to take a haircut on the principal through a one-time settlement. Another example is a ₹500 crore loan to Oyster Buildwell, an Avantha group company, which had negligible capital and income at the time of sanctioning the loan. Analysts questioned the continuing presence of some of Kapoor’s former aides in the bank.