Banking
YES Bank reportedly loaned Rs 2,183 crore to 8 unlisted companies of the Indiabulls Group, which had either negative net worth or an average equity capital of Rs 1 lakh each.

In a case of lack of due diligence while sanctioning of loans, it has emerged that YES Bank, when it was still headed by Rana Kapoor, approved loans to the extent of Rs 2,000 crore to companies that were linked to Indiabulls.

As per a Mint report, information on this has been disclosed in a case in the Delhi High Court and has been filed by Citizens Whistleblower Forum. The purpose of this litigation is to bring out the fact that banks resort to indiscriminate lending without conducting proper background verification of the borrowers. In this case, there were in all eight companies that were in some way connected to Indiabulls and some of them had an equity capital of just Rs 1 lakh. Some had negative worth. However, Yes Bank granted them loans which amounted to Rs 2,183 crore in total.

While the loans stand repaid and Indiabulls claims there is no outstanding debt to Yes Bank as of date, this points towards possible lax in due diligence by the bank.  

The names of these companies are Airmid Aviation Services Ltd, Tupelo Constructions Pvt. Ltd, Tupelo Land Development Pvt. Ltd, Paidia Conconnection Pvt. Ltd, Viswamukha Properties Pvt. Ltd, Paidia Softinfo Pvt. Ltd, Keysha Mining Pvt. Ltd and Bobinar Infrastructure Pvt. Ltd.

If you take Tupelo Constructions from the list above, the company got loans of Rs 335 crore from Yes Bank between 2013 and 2016. Its equity capital is just Rs 1 lakh; Tupelo Land Development got loans of Rs 375 crores and its equity capital is also the same Rs 1 lakh; Airmid Aviation Services had a negative net worth but managed to obtain loans of Rs 245 crore in 2015 from Yes Bank.

All these loans stand paid by Indiabulls with the last tranche of payments being released to Yes Bank in January 2019.

The basic charge being made by the forum in the HC is that these were just shell companies and the funds received from Yes Bank were invested by them in various instruments.

There is no clarity on how the court will view these affidavits. There is a possibility the judge or judges may ask the litigants to approach the regulators like RBI and SEBI to get the allegations investigated. A direct investigation could be ordered as well.