Signage of Yes Bank seen at the entrance of one of its branch in Bengaluru, India. (Photographer: Anirudh Saligrama/BloombergQuint)

Did Not Indulge In Evergreening Of Loans, Says Yes Bank In Response To Query From NSE

Private sector lender Yes Bank, on Thursday, refuted allegations of evergreening of corporate loans and inflating its share price ahead of key fund raising activities. The bank also said that it had no dealings with Rana Kapoor’s family office, which manages personal investments of Kapoor’s three daughters.

The clarifications from the lender came in response to queries sent by National Stock Exchange, after the exchange received a written complaint making certain allegations against the bank. Yes Bank said that while it had received the queries from the stock exchange, it had not been given a copy of the original complaint.

The queries and the bank’s responses come soon after the Reserve Bank of India said that managing director and chief executive officer Rana Kapoor can continue at the bank only until end of January 2019. The RBI did not disclose the reasons for not accepting a recommendation from the Yes Bank board to reappointment Kapoor for another three year term. Earlier this week, the board decided to seek an extension for Kapoor’s term till September 2018. Shares of Yes Bank had fallen 9 percent in trade on Thursday, taking the five-day fall in the stock to nearly 50 percent.

Allegations Of Evergreening Of Bad Loans

While responding to NSE’s queries about allegations of evergreening of loans, the bank said that it had not entered into any transactions with the intent to do any window dressing of corporate loans to hide their NPA status. The bank clarified that it is subjected to an annual risk based supervision of the Reserve Bank of India, which is very comprehensive.

The bank therefore denies any window dressing of corporate accounts to conceal actual NPAs as has been indicated in the query.
Yes Bank response to NSE’s queries

The bank also said that it has regularly made disclosures regarding any divergences in asset quality classification, which has been validated by its statutory auditors.

Due to guidelines issued by the RBI in April 2017, banks were expected to disclose the divergence between the NPA number disclosed by them and that assessed by the RBI. The disclosure was mandatory for banks where the divergence was larger than 15 percent of the originally reported bad loans. For the financial year ended March 2016, Yes Bank reported a divergence of Rs 4,173 crore. In the following financial the divergence increased to Rs 6,355 crore, according to the bank’s disclosures.

Dealings With CEO’s Family Office

As part of its queries, NSE asked whether there was any parallel lending and investing businesses that are being run by Kapoor’s family office, which could compromise the interests of the bank. The NSE also asked if the family office was being used “as a conduit to undue benefits for credit exposures, including real estate exposures.”

To this, Yes Bank said that it had no dealings with the Three Sisters Family Office.

Allegations Of Stock Price Manipulation

The NSE queries also sought a response from Yes Bank regarding alleged manipulation of the bank’s stock price ahead of important capital raising activities like qualified institutional placements.

Yes Bank in its response pointed out that it had followed all extant guidelines laid down, regarding disclosures of fund raising activities. It clarified that in September 2016, when the bank had decided to defer its QIP, it had voluntarily written to stock exchanges, seeking an investigation into the volatility in its share price and any manipulation by vested interests.