The Banker Who Crushed His Diamonds by Furquan Moharkan (books for men to read .TXT) 📗

the RBI. And with Patel being a hawk and a tough boss, an inquiry into the bank’s functioning started. Over the next one year, as the RBI started to find damning evidence of governance lapses, which ultimately turned out to be of a deliberate nature, the bank propped up Rana’s name for yet another three-year term as bank chief. By then, Rana had already been heading the bank for almost fifteen years.

The RBI, however, seemed to have made up its mind. It wasn’t going to give any further extension to Rana Kapoor.

On 30 August 2018, the bank informed the exchanges: ‘Rana Kapoor may continue as Managing Director & CEO of YES Bank till further notice from RBI.’ However, as the investigation started revealing misgovernance, the RBI informed the bank that Rana Kapoor couldn’t continue as the bank’s chief beyond 31 January 2019.

The RBI, in its letter dated 17 September 2018, a letter which is said to have been toned down by the central bank, to the bank’s then chairman Ashok Chawla also said that the bank had displayed ‘highly irregular’ credit management practices. Since, the bank was being run as a one-man show, management used all its might to save its promoter and long-serving CEO Rana Kapoor. Just eight days later, on 25 September 2018, the bank’s board said that it would ask the RBI to grant an eight-months extension to Kapoor. The plan was to seek extension till 30 April 2019, so that he could supposedly help finalize the financial statements for the financial year ending on 31 March 2019. Thereafter, it would apply for yet another extension till 30 September so that Kapoor could preside over the annual general meeting.

‘The board also decided that, given the role of Rana Kapoor as MD and CEO since the inception of the bank in 2004, and the time-consuming challenges of finding a suitable successor, the incumbent MD and CEO be given further time in his current position beyond 31 January 2019,’ the bank had informed the exchanges after the 25 September board meeting. In fact, YES Bank’s then chairman Ashok Chawla had also met RBI governor Urjit Patel to bargain for an extension of Kapoor’s tenure, much to the latter’s dismay.

However, by 18 October, with a no-nonsense governor running the show, the RBI said a firm no to any plans of extending Rana Kapoor’s tenure on any pretext. ‘The Reserve Bank of India has reaffirmed that a successor to Rana Kapoor should be appointed by 1 February 2019,’ YES Bank informed both the exchanges on 18 October 2018. Internally, the move by the RBI gave confidence to the employees who were otherwise scared of Rana Kapoor. Many saw him as a maverick banker who was also an ultra-tough boss.

In the notes to the accounts of the September 2018 results, the bank had said, ‘The bank became aware in September 2018, through communications from stock exchanges, of an anonymous whistle-blower complaint alleging irregularities in the bank’s operations, potential conflicts of interests in relation to the former managing director & CEO and allegations of incorrect NPA (non-performing loans) classifications.’

The bank conducted an internal inquiry of these allegations, which were carried out by the management (then headed by Rana Kapoor himself) and supervised by the board of directors. A report based on this inquiry was reviewed by the board in November 2018. In December 2018, the audit committee of the bank engaged an external firm to independently examine the matter. In April 2019, the bank had received the phase 1 report from the external firm and, based on further deliberations, directed a phase 2 investigation from the said firm. Further, during the quarter ending on 31 December 2019, the bank received forensic reports on certain borrower groups commissioned by other consortium bankers, which gave more information regarding the above-mentioned allegations.

‘The bank at the direction of its Nomination and Remuneration Committee (NRC) obtained an independent legal opinion with respect to these matters,’ the bank said in its March 2020 quarterly filings. In February 2020, the bank received the final phase 2 report from the said external firm.

The special audit confirmed the complaint that exorbitant payouts were made to some employees who were close to Rana Kapoor, like his executive assistant (secretary) Lata Dave; Amit Shah, former group president and head of marketing and communication; Rajat Monga, former senior group president and chief financial officer; and Ashish Agarwal, former chief risk officer, reported business daily LiveMint in November 2019.1

‘The bank is in the process of evaluating all of the above reports and concluding if any of the findings have a material impact on financial statements/processes and require further investigation. The bank has taken this report to the newly constituted audit committee and board and will progress further action basis the guidance and recommendations,’ the bank said in Note 14 of March 2020 financial results. The whistle-blowers’ letters kept coming even after Rana was gone. During the financial year ending on 31 March 2020, the bank had received various whistle-blower complaints against the management, the former MD and CEO and certain members of the board of directors prior to being superseded by the RBI, the bank had informed exchanges.

Now, back to Rana’s last days at YES Bank. What were the reasons behind the RBI’s firm no against Rana Kapoor’s extension? The signs behind this decision had become clear by April 2018. The central and Rana-controlled Yes Bank exchanged at least eight letters related to persistent governance and compliance failures, and violations of statutory and regulatory rules at the bank till that time. The RBI had been keeping a strong vigil on YES Bank, right from Raghuram Rajan’s time. Rajan, when I approached him for his opinion on YES Bank, wasn’t willing to divulge much as he was part of the RBI, yet he told me, ‘We, at the RBI, started scrutinizing Yes Bank more closely during my term, trying to reconcile our sense that it was taking significant credit risk with the low NPAs it was reporting.’

But