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Rise Of Yes bank (Rana Kapoor)

Rise Of Yes bank (Rana Kapoor)

 

RISE AND FALL OF YES BANK

 

  • RANA KAPOOR
  • Kapoor was born and was brought up in New Delhi. He completed his schooling from Frank Anthony Public School, New Delhi in 1973 and went on to earn BA degree from Shri Ram College of Commerce (1977).
  • He then obtained an MBA degree from Rutgers University in New Jersey, US (1980). Kapoor received an honorary fellowship from All India Management Association (AIMA),President’s Medal from Rutgers University,an honorary PhD from GB Pant University of Agriculture&Technology
CAREER

 

  • In 1980, Kapoor joined Bank of America (BoA) as a management trainee.Kapoor worked at BoA for about 16 years, till 1996, managing corporate, government and financial institution clients.
  • The NBFC was set up in 1997, with the three Indian partners chipping in with an equity capital of Rs. 9 crore each. In 2003, the three sold their stake for $10 million each, generating the seed fund for the bank.
CAREER

 

  • In 2003, the team was granted a banking licence by the Reserve Bank of India (RBI) to set up Yes Bank. In 2005, Kapoor was named Ernst & Young’s Start-up Entrepreneur of the Year.
  • In January 2017, Bloomberg noted that with the rising share price of Yes Bank, Kapoor had become a billionaire. In September 2018, Yes Bank announced that they had ordered Kapoor to step down from his CEO position in January 2019.
RISE OF YES BANK

 

  • Yes Bank Ltd’s tagline proclaims—“India bole Yes”. Its hoardings can still be seen across cricket fields and large corporate events
  • For some time now, the private sector lender’s cofounder, former managing director (MD) and chief executive officer (CEO) Rana Kapoor has stopped hosting lavish parties at his South Mumbai apartment on the 27th floor of Samudra Mahal.
  • On Sunday morning, he was taken into custody by the Enforcement Directorate.
ALWAYS YES

 

  • When the going was good, Kapoor was known as the banker who would never say “No”. Under Kapoor, Yes Bank was the go-to institution for companies seeking loans. The bank would even lend money to corporates who had been refused by other lenders.
  • Yes Bank grew 26 times in its size since its inception in 2003 to September 2018, when its troubles were finally made official by the Reserve Bank of India (RBI).
  • The bank has lost more than 90% of its value and its equity securities have been removed from the derivatives segment of all exchanges.
ALWAYS YES

 

  • It ultimately had to be bailed out by the government on 6 March. Right from the beginning, the man and the bank were one.
  • All business decisions at Yes Bank, even where the bank’s board was involved, ultimately hinged on Kapoor’s whims and fancies. Many senior employees who couldn’t get along with him ultimately ended up leaving.
  • In the first decade of its existence, Yes Bank’s loan book went from zero to Rs.55,000 crore and then the runaway growth rates of 50%-plus began.
 ALWAYS YES

 

  • In some cases, the bank’s recovery strategy was also different. If a borrower was about to default, it would dial another lender (say a non-banking financial company or NBFC in need of customers) to arrange funds for the borrower to make him repay Yes Bank’s loan so that the account does not turn a non-performing asset.
  • Yes Bank’s stock staged a meteoric rise in those 10 years. Between March 2008 and August 2018, its share price skyrocketed from merely Rs. 9 to Rs. 404. The bank’s loan book also swelled to make it the country’s fourth largest private sector lender.
ALWAYS YES

 

  • Billions were lent to companies from stressed sectors like Dewan Housing Finance Corp. Ltd, Infrastructure Leasing and Financial Services Ltd (IL&FS), Anil Ambani’s Reliance Group and Subhash Chandra’s Essel Group—all of which are in acute crisis and facing multiagency probes today.
  • The bank’s outstanding loans grew from Rs 55,000 crore in FY14 to Rs.2.41 trillion in FY19. Despite knowing the inability of existing borrowers to repay, Yes Bank lent more money to them.That’s how “Rana created a task force that perfected the creation of an imperfect bank,” recalls the close confidante of Kapoor.
 FALL OF YES BANK

 

  • For FY16, according to an RBI report, Yes Bank under-reported bad loans by a massive Rs. 4,177 crore, which enabled it to inflate its profit by 22%.
  • For FY17, Yes Bank reported a higher divergence of Rs.6,355 crore. It was clear that the stress was getting covered up by the management.
  • Finally, on 17 September, when RBI restricted Kapoor’s tenure to 31 January 2019 and the bank was directed to find a new CEO, jittery investors dumped Yes Bank shares.
FALL OF YES BANK

 

  • Rajat Monga, the then group chief financial officer and president, had to take over the reigns and approve the financial results as Kapoor was nowhere to be seen.
  • To make matters worse, there was the sudden default by the country’s then-largest non-bank lender IL&FS, to which Yes Bank had a large exposure.
  • Only in January 2019, when former Deutsche Bank India chief Ravneet Gill’s name was announced as the new CEO, the Yes Bank stock started showing some recovery.
FALL OF YES BANK

 

  • But this too didn’t last for long. As provisions against bad loans escalated, the bank’s capital started eroding. Gill realized fresh capital of about $2 billion was urgently needed. But try as he may, Gill has been unable to bring in new investors.
  • Yes Bank was at an all-time high in August 2018 just before RBI ousted Kapoor.
  • The rescue package, wherein State Bank of India (SBI) will buy 49% stake in the lender, will bring in the much-needed capital. But Yes Bank now becomes the monkey on SBI’s back and will need constant capital infusion.
FALL OF YES BANK

 

  • The Enforcement Directorate (ED) arrested Rana Kapoor early on Sunday after hours of interrogation and searches at his and his daughters’ residences in Delhi and Mumbai. The 62-year-old broke down when he was produced in a Mumbai court.
  • ED’s lawyer Sunil Gonsalves said at the hour-long hearing the total proceeds of the alleged crime amounted to Rs 4,300 crore, and that Rana Kapoor had refused to cooperate with the investigation.
  • Yes Bank after the Reserve Bank of India (RBI) placed the bank under a moratorium and imposed a Rs 50,000-limit on withdrawals.