The Banker Who Crushed His Diamonds

Rana wasn’t someone who would give up so soon. He had a friend in the central government, a minister, who was powerful back then. He called him multiple times, but the minister didn’t receive his calls. As Rana was dealing with the RBI’s strict vigil, he was also trying to sell his shareholding in the bank—for which he tried approaching two prominent business tycoons in the country. One of them offered to pay him Rs 200 per share, but Rana wanted Rs 300 per share and the deal was called off. Rana approached yet another tycoon, who saw the rot in the books, and instead of buying stake in the bank, started shorting on the YES Bank stocks. Shorting an asset means investing in such a way that the investor will profit if the value of the asset falls. Shorting happens when an investor borrows shares and immediately sells them, hoping he or she can scoop them up later at a lower price, return them to the lender and pocket the difference.

It is said that these people used to sweat after Rana used to show them the list of the top fifty borrowers at YES Bank—in a way, they were just very, very bad assets.

As the RBI tightened its noose, the YES Bank board saw a flurry of exits. On 14 November 2018, the bank’s chairman Ashok Chawla stepped down, citing an inability to perform his duties. ‘YES Bank announces that Ashok Chawla, non-executive independent part-time chairman, has tendered his resignation from the bank’s board, with immediate effect, mentioning that during the current transition period, the bank would need a chairman who could devote more time and attention,’ the bank told exchanges on that day.

Interestingly, Chawla, a former babu and also the NSE chairman at a time when he was YES Bank chairman well (he stepped down as NSE chairman in January 2019), has been alleged to play a key role in the high-profile Aircel-Maxis deal scam—a matter which is sub judice still. Chawla, along with six other members who are being prosecuted, were part of the Foreign Investment Promotion Board (FIPB) which has been disbanded now. The Central Bureau of Investigation (CBI), the investigating agency in the matter, has alleged that despite the fact that an investment of $800 million (over Rs 3500 crore) was made in Aircel by Maxis, and the Cabinet committee on economic affairs was the competent authority to grant approval, the investment proposal was wrongly projected as merely involving an investment of Rs 180 crore.

But YES Bank’s tryst with having some retired IAS officer heading the board didn’t stop there. Brahm Dutt, a former IAS officer who was on the board of YES Bank since 2013, replaced Chawla on 12 January 2019, days before Rana’s time at YES Bank was over.

Back to the developments of 14 November now. Yet another director at YES Bank, Vasant Gujarathi, stepped down and was replaced by Uttam Prakash Agarwal. The blows didn’t stop here. On 15 November 2018, O.P. Bhatt resigned as the external expert of the ‘Search & Selection Committee’ (S&SC)—a committee aimed at finding Rana Kapoor’s replacement. Bhatt himself was under the lens of the CBI at that point in time.

A former SBI chairman, O.P. Bhatt, along with more than a dozen senior officials of the lender, were under the CBI scanner for a loan granted to Vijay Mallya. Couple of years back, the flamboyant liquor baron had escaped from India after accusations of money laundering and defaults on loans worth Rs 9000 crore. Bhatt was the SBI chairman between 2006 and 2011, when the lending was done. The others worked at SBI branches in Bengaluru and Mumbai and held posts such as deputy manager, group executive, assistant general manager, credit analyst and relationship manager.

As irony would have it, a man who was under the scanner for bad loans was looking for a successor for a man who was being shunted out for rising bad loans.

However, the bank preferred not to find any replacement for Bhatt, which many believe was aimed at avoiding any kind of scrutiny. ‘Given the significant progress made by the S&SC, with the support of Korn Ferry, over the past three meetings (the most recent being held on November 13, 2018), in its mandate to identify a suitable successor to Shri Rana Kapoor, MD & CEO, YES Bank, the NRC has decided to continue with the existing members to complete the process as per the timeline communicated by RBI,’ the bank informed exchanges on 15 November 2018.

Just four days later, Rentala Chandrashekhar, non-executive independent director, tendered his resignation from the board of directors of YES Bank with immediate effect, which was attributed to personal reasons by the bank in its regulatory filings. However, the next day the bank put out a revised press release, silently removing the attribution to ‘personal reasons’. According to a Business Standard report,² Chandrashekhar wasn’t happy with the functioning of the bank.

As the bank was seeing a flurry of exits, Rana Kapoor was trying to make a comeback. He wanted to be named as the bank’s non-executive chairman once his term ended on 31 January 2019.

The RBI’s no was so firm that despite the bank’s former Articles of Association, the terms for which were decided in 2005 and were loaded in Rana’s favour, he could not be reinstated in any capacity. A closer reading of YES Bank’s Articles of Association—that specify the regulations for a company’s operations and define the company’s purpose —reveals that under Article 121 Rana Kapoor could not retire from the board. Also, as per Article 110, Rana Kapoor had the right to nominate up to three directors, provided he secured the approval from his estranged sister-in-law Madhu Kapur for these appointments.

It is here that the YES Bank story goes into soap-opera mode.

So, in early October 2018, Rana Kapoor’s close aide at the bank, Rajat Monga, called up Madhu Kapur and Shagun Gogia Kapur. He requested for a meeting with Rana Kapoor. The mother and daughter