Timeline of Yes Bank debacle

In the latest developments in the YES Bank case, after the SBI led bailout plan is in process, the Reserve Bank of India has withdrawn its imposed moratorium on the bank. Normal banking operations will be now restored. Let us have a look at the timeline of the debacle that put Yes Bank in such a position.
Complete Coverage: Yes Bank

Crux of the Matter

Timeline of Debacle
Yes Bank’s stock had hit an all-time high in August 2018 with its market capitalisation crossing one lakh crore mark. However, its stock price began falling as the bank started looking for a new CEO after the RBI refused Rana Kapoor’s extension till 2021 and gave him time only till 31st January 2019.

Concerns started arising after the Chairman Ashok Chawla resigned on 11th January 2019 after his name came in the corruption charge sheet by CBI. This led to downgrading debt instruments of the bank by rating agencies with increasing uncertainty around Rana Kapoor’s successor.

Rana Kapoor stepped down in January 2019 and Ajai Kumar was made the interim CEO until the Head of Deutsche Bank India Ravneet Gill was appointed as the CEO on 1st March 2019.

In February 2019, the RBI reported that the bank’s risk assessment report has multiple lapses with regulatory violations and non-compliance with the SWIFT system. SWIFT is a secure financial messaging service and a SWIFT code is used to identify banks and financial organizations.

Yes Bank’s share prices reduced further when Former CEO Rana Kapoor put his entire 7.34 % stake against a loan. Later, he started selling his shares and took a complete exit from the bank by December 2019.

Fundraising Fallout
In April 2019, the board of the bank approved fundraising of $1 billion as it became highly important to control the losses which had reached Rs.1,507 crores in the fourth quarter of 2018-19. RBI appointed ex-RBI Deputy Governor R. Gandhi as the additional director of Yes Bank’s board with an aim to increase scrutiny of the bank.

Yes Bank reported a 91% drop in first-quarter profit in July 2019 with its gross bad loan ratio at 5.01%. CEO Ravneet Gill announced a deal to sell a minority stake to a tech company to boost its capital. In October 2019, Yes Bank got a binding investment offer of $1.2 billion from the Hong Kong-based global investor SPGP Holdings. Its stock surged by 39% after the news came out.

As the bad loan ratio further deteriorated to 7.39%, the bank reported its biggest loss in November 2019 and it announced its plan to sell shares worth $1.2 billion to Canadian investor Erwin Singh Braich and SPGP Holdings. But in January 2020, Yes Bank rejected Braich’s investment.

CEO Ravneet Gill, in a number of attempts to raise capital, only managed to get $270 million. In February 2020, the bank did not disclose its quarterly report and said it will be delayed by a month as it is in talks with potential investors.

As the deposit base reduced by 34% to Rs.1.37 trillion between 30 September and 5 March, RBI placed Yes Bank under moratorium and took over its board for 30 days with restricted withdrawals up to Rs.50,000 to protect depositors money.

ED’s Investigation
The Enforcement Directorate has registered a money laundering case against Former Yes Bank CEO Rana Kapoor and has summoned all major borrowers as part of the investigation into the financial irregularities. ED also raided Kapoor and his daughters’ residence in Mumbai and New Delhi. He was presented in the court on March 16 and his custodial remand was extended till March 20.

ED is investigating loans given to 44 companies belonging to 10 large business groups during the tenure of Rana Kapoor which now accounts for bad debts of Rs.34000 crores. The major borrowers include Subhash Chandra of the Zee Group, Sameer Gehlaut of Indiabulls Group, Jet Airways founder Naresh Goyal, Dheeraj and Kapil Wadhawan of DHFL group and Peter Kerkar of Cox and Kings, Anil Ambani of Reliance Group. They all have been summoned by the ED.

Initial investigation has revealed that about 78 companies owned by Kapoor’s family members were being managed by Rana Kapoor who is being interrogated for laundering funds from YES Bank to these companies. The ED also named his wife Bindu and three daughters as accused in the case.

ED summoned Kapil and Dheeraj Wadhawan of the DHFL group for a suspicious transaction worth Rs.4300 crores with the Yes Bank. They both are already out on bail in the Iqbal Mirchi case for diverting Rs.12500 crores to 80 shell companies by using 1 lakh fake borrowers. Essel Group has borrowed from Yes Bank Rs.8415 crores through its 16 firms; of that loan, some have turned NPAs.

The Enforcement Directorate has requested Dr. Subhash Chandra’s presence on 18th March 2020, to make a statement on the information which is already available with them. We wish to cite that all credit facilities availed were fully secured. The Group has never made any transactions with Mr.Rana Kapoor or his family.

– Essel Group

Indiabulls Real Estate and Indiabulls Housing Finance Ltd had borrowed Rs.5800 crores. According to the India Bulls statement, they have not received any summons from the ED and it has clarified that Indiabulls Housing has no term loans outstanding from Yes Bank. The ED has also summoned Reliance Group Chairman Anil Ambani who has reportedly borrowed the maximum Rs.12,800 crores from the cash-strapped Yes Bank. DHFL had borrowed Rs 4,735 crore, while Cox & Kings had borrowed Rs 1,050 crore. Cox & Kings has filed for bankruptcy and is in the process of the insolvency and bankruptcy code.

Bailout Plan
Cabinet approved the reconstruction scheme for YES Bank under which eight public and private banks led by State Bank of India will infuse capital into Yes Bank Ltd. The State Bank Of India will buy a 49% stake by investing Rs. 7250 crores and out of which it will have to maintain at least 26% shares for 3 years.

In the first round of funding, ICICI and HDFC Bank will invest Rs. 1000 crores (for 7.97% stake) each in Yes Bank as part of the RBI’s reconstruction plan. Kotak Bank, Axis Bank, RK Damani, Jhunjhunwala and Azim Premji Trust will be putting in Rs. 500 crores each.

RBI also decided to extend a loan of  Rs. 10,000 crores immediately under the special liquidity facility against government securities.

“Authorised capital has been raised to Rs. 6200 crores from Rs. 1100 crores to accommodate the immediate and subsequent increase in capital requirements. The RBI-appointed administrator will also vacate his office within 7 days after the notification and the new board will take full charge. The scheme will protect depositors’ interest, provide stability to YES Bank and a stable financial environment and banking system.”

– Nirmala Sitharaman, Union Finance Minister

Rana Kapoor is the founder, and former managing director and CEO of Yes Bank. In February 1995, a team from Rabobank arrived in India, scouting for opportunities. Kapoor, his brother-in-law Ashok Kapur and Harkirat Singh made a proposal to the visiting team for two joint ventures: a non-banking financial company and a bank. During the next year, Kapoor held meetings with the Rabobank executives in India, Singapore and the Netherlands. The NBFC was set up in 1997, with the three Indian partners chipping in with an equity capital of Rs.9 crores each. In 2003, the three sold their stake for $10 million each, generating the seed fund for the bank. In 2003, the team was granted a banking licence by the Reserve Bank of India (RBI) to set up Yes Bank. They established Yes Bank with the vision of “Building the Best Quality Bank of the world in India” by 2015. More Info