How RBI and government cast net to nab Rana Kapoor
What's the story
Yes Bank is spiraling downwards and its founder Rana Kapoor is in the custody of Enforcement Directorate. The Central Bureau of Investigation is also probing him over corruption charges. But nabbing Kapoor wasn't easy for RBI which had been alert since he was ousted from the bank last year. The central bank, in connivance with central agencies, laid a plan to catch him.
Context
Kapoor never refused risky-loans, his style of functioning spelled troubles
Kapoor, once a reputed banker, co-founded Yes Bank in 2004. The bank soon became one of the largest lenders of India, but the habit to hand over loans easily to risky businesses spelled trouble for it. When Yes Bank's heydays ended, it had its presence in almost every disrespected brand, be it DHFL, IL&FS, the Anil Ambani Group, or the Essel Group.
Details
Kapoor's motto of 'Invest Big' cost the bank
Those close to Kapoor remember him as a flamboyant banker who hosted lavish parties. "He would only say - if you don't invest big, you don't grow big," a senior official of the bank told Mint. Under Kapoor, Yes Bank grew 26 times in size, but its balance sheet suffered too, leaving it with a hole of Rs. 54,000 crore.
Downfall
Kapoor was ousted, his successor couldn't save Yes Bank either
With bad loans rising, RBI directed Kapoor to leave the bank. He was succeeded by Ravneet Gill, who struggled to find funds to keep the bank running, but failed. And now, it has been reported that in the last eight months, whenever an investor agreed to rescue the bank, the talks fell flat. This happened at least thrice, tipping off RBI and other agencies.
Plans
Apparently, Kapoor's people talked investors out of deal
When capital infusion plans failed, Kapoor sent feelers to RBI about his intention to return to the bank's helm. "Every time things appeared to be heading towards finality, his people would meet potential investors and probably talk them out of it," an official told TOI. Once RBI understood Kapoor's intention, the bank gave the impression that it wants him back at Yes Bank.
Homecoming
RBI's plan forced Kapoor to return to India
Once Kapoor was convinced RBI fell into his trap, he returned to India from London, where he stayed for several months. As soon as he returned, agencies like ED increased surveillance to ensure he doesn't leave the country. He went incommunicado briefly, but that's about it. Some guards told ED Kapoor was planning to go to London again, prompting them to be more alert.
Decision
Time was running out, government took the unprecedented step
Within the government, there were concerns about whether to arrest Kapoor or look for new investors. Since a board meeting was scheduled for March 14, there was also a worry that bad loans could lead to a wider meltdown. The bigger depositors had already started withdrawing money. Considering these aspects, the government decided to take the decision of putting Yes Bank under moratorium.