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CBI steps in to probe Yes Bank, SBI details its plan
State Bank of India (SBI) on Saturday set a cap of Rs 10,000 crore on investment in beleaguered Yes Bank Limited, including an immediate infusion of Rs 2,450 crore.
State Bank of India (SBI) on Saturday set a cap of Rs 10,000 crore on investment in beleaguered Yes Bank Limited, including an immediate infusion of Rs 2,450 crore, and reassured depositors in the latter that their money was “absolutely” safe, as investigators questioned co-founder Rana Kapoor and probed questionable loans extended by the private lender.
If SBI, the country’s largest commercial bank, becomes the sole investor in Yes Bank and picks up a 49%t stake, the immediate outgo would be Rs 2,450 crore, chairman Rajnish Kumar said. SBI will not seek capital from the government to fund the rescue and may instead work with other investors, Kumar told reporters. Many potential co-investors have approached SBI to be part of the deal, he said.
“Our investment is an assurance to depositors and our co-investors,” Kumar said. “We are in a comfortable position to inject funds into the bank.”
He added that he had set an investment “boundary” of Rs 10,000 crore for the bailout,based on an assumption of higher capital requirements in the future and to keep Yes Bank operational. He stressed that it wasn’t a merger and SBI wouldn’t be involved in Yes Bank’s day-to-day operations.
On Friday evening, a day after it clamped a moratorium on Yes Bank, limiting withdrawals to Rs 50,000, the Reserve Bank of India (RBI) unveiled a rescue plan under which a strategic investor would acquire a 48% stake in the lender and will not reduce it to below 26% before three years from the date of infusing the funds.
Yes Bank plunged into trouble after failing to raise money, around $2-2.5 billion, that it needs.Kumar said that SBI, being the country’s largest bank, had to try and prevent an important lender from going down. “You need a credible name with the investors to save a bank,” he said. “SBI is a credible institution with size.”
Kumar said SBI had received the RBI’s draft scheme of reconstruction for Yes Bank and its investment and legal teams were carrying out a due diligence on the draft. “Once we complete our due diligence, we will go back to the RBI with our comments,” he said.
Monday, March 9, is the deadline for a potential investor to submit its feedback to the central bank. Kumar said the investment in Yes Bank wouldn’t be against SBI’s shareholders’ interests, ruled out any conflict of interest and assured depositors in the troubled bank that their money was “absolutely not at risk.”
In a separate statement, the state-owned bank said: “All the employees of the reconstructed bank shall continue in its service with the same remuneration and on the same terms and conditions... at least for a period of one year.” Asked about the impact of raids by the Enforcement Directorate (ED) on Friday at the Mumbai residence of Yes Bank co-founder Rana Kapoor, who was questioned by the ED on Saturday, Kumar said it will not affect the lender’s restructuring exercise.
“Yes Bank is an entity and Rana Kapoor is an individual. So if an individual has done something wrong, they will pay the price for that but why should the enterprise suffer,” he said.
The ED, which investigates suspected money laundering offences, questioned Kapoor for hours as the Central Bureau of Investigation (CBI) stepped in to probe dubious loans given by the bank, and the financial dealings and investments of Kapoor and his family members, officials said on condition of anonymity.
A CBI official said the agency was likely to register a preliminary enquiry “very soon” and that it was already in touch with the RBI, the finance ministry, ED and regulatory bodies to access documents relating to Yes Bank.
ED investigators questioned Kapoor on alleged transfers worth crores of rupees into the accounts of his family members by Dewan Housing Finance Corporation Ltd (DHFL) after the bank sanctioned several loans to the non-banking financial company, which has gone bankrupt. His residence in Mumbai and a couple of locations in Delhi were also searched on Saturday by ED.
An ED official said a loan of Rs 600 crore was sanctioned between April and July 2018 by DHFL to a company called Doit Urban Ventures, which is controlled by family members of Kapoor. “This transaction took place when DHFL failed to repay the loans of Yes Bank,” said the official. Yes bank’s exposure on DHFL is worth around Rs 3,700 crore.
Another ED official said Yes Bank also gave a loan of Rs 750 crore to RKW Developers, a company run by the Wadhawans of DHFL, which is now under the scanner in a money laundering probe related to its financial dealings with underworld don Dawood Ibrahim’s aide Iqbal Mirchi, who died in 2013.
Kapoor was also asked about a Memorandum of Understanding signed between DHFL and Yes Bank in 2011 pertaining to home loans to customers of the latter, said the second ED officer.
Kapoor could not be contacted for comment.
