Huge scam in YES Bank for many years, says Enforcement Directorate



former managing director (MD) and chief executive officer (CEO) told the (ED) that the bank had sanctioned huge amounts of credit to many corporates that were facing significant stress and liquidity issues.


An ED chargesheet quoted Gill as saying that the private lender on March 31, 2019, had put out a credit watch list naming several large corporates/borrowers, including Reliance Group, Essel Group, Cox & Kings, Dewan Housing Finance, Omkar group, Radius Developer and others.


“In this watch list, the bank took a contingency provision of Rs 2,000 crore as a measure of prudent accounting and transparency,” said the ED chargesheet.


ALSO READ: NCLAT’s resolution professional ruling: Several bankruptcy cases face delay


The chargesheet also contained statements made by other bank executives, alleging that co-founder had overruled objections by risk teams while extending loans to realty companies – RKW Developers and Belief Realtor – owned by DHFL promoters.


“It was classified as a red-flagged account in November 2019, on the ground of non-commensurate progress in the project vis-a-vis the amount disbursed. Of the total sanctioned loan of Rs 1,700 crore, Rs 750 crore was disbursed on the same day of sanction,” according to a senior executive’s statement cited by ED.


The official said the bank had to cancel the additional loan of Rs 950 crore after the Reserve Bank of India (RBI) started special audit of the account.






ALSO READ: $717-mn loan case: China banks will have to move Indian courts against ADAG


The special court of Prevention of Act (PMLA) has taken cognizance of the first chargesheet filed on Friday in connection with charges against Kapoor, his family members and their three companies.


“This is a complex case of financial frauds and there are many interlinked transactions and entities. These transactions have by design been conducted in a convoluted manner. Therefore, there are various indirect co-relations and suspected quid pro quo that will come in light only after thorough investigation, ED said.


It further said that Kapoor and family were “controllers of financial institutions that are among the biggest in India and therefore enjoy immense clout and influence. Therefore, they are capable of designing very complex structure to hide their impropriety,” the ED said.


ALSO READ: Ratio of India’s public debt to GDP likely to scale a new high in FY21


According to the ED, the huge scam was brewing for many years during the tenure of Kapoor. “It is evident that the accused person knowingly indulged in these criminal activities and its consequent generation of proceeds of crime. The end beneficiaries of these transactions were Kapoor and his family members, along with associates, the report noted.


ED explained how Kapoor misused his official position to gain undue financial benefit for him and his family. The proceeds of the crime generated in this case travelled to main holding companies, including Morgan Credit, YES Capital and also to its subsidiaries Doit Ventures and RAB Enterprises. The entire proceeds is Rs 5050 crore, it said.


ED charged Kapoor for layering and parking kickbacks received in exchange of sanctioning of loans and alleged that he was the controlling authority and decision maker during the material period when the fraud was perpetrated.


Proceeds of the crime had been siphoned off and laundered or concealed, or layered and integrated into the main financial system through the acquisition of properties.


ALSO READ: Extension of moratorium may lead to credit indiscipline, say bankers


His wife Bindu Kapoor has been charged with being aware of the source of monies that were being routed through these companies. “She was hand in glove with her husband, using the account of these companies and helping siphon off multiple accounts of other 100-plus subsidiaries and utilising and projecting them untainted.


chart


She was an abetter of the crime, thereby being actually involved in laundering”, the report said.


Gill, too, had talked about several inherent risks with the DHFL-promoted projects, which were at a nascent stage.


They required approvals from various authorities for higher floor space index and also from slum dwellers for rehabilitation.


The standard process stipulated by the bank for valuation was waived and no end-use certificate was sought from the borrower. Besides, there was a large upfront expenditure with proportionately high debt financing. The large portion of internal approvals would be realised towards the latter stage of the project.


ALSO READ: From Nestle India to Maruti Suzuki, impact of Covid-19 on earning estimates


On the RBI moratorium, Gill said the core equity tier quarter (CET1) of the bank started to sink and stood at 8.7 per cent as on September 30, 2019. It was low compared to peer banks, given that the bank had to set aside capital for growing provisioning.


He said the bank and the regulator were concerned that when the December quarter earnings were disclosed – and given that no fresh capital was in place – it could result in large deposit outflow and impair the bank’s future viablity.





Source link

Free Course

"Double Your Traffic in 30 days" + Secret Bonus

valued at $299

This amazing course will teach you, step by step, how to double if not triple your traffic over the next 30 days.

100% Privacy. We will never spam you!