They were the rockstars of India’s banking industry. Their word carried weight in the corridors of power and their opinion mattered, at home as well as abroad. They inspired envy among peers but were the inspiration for hundreds of youngsters looking to make it big in the banking industry.
They moved with the swish set. Had expensive addresses-from Mumbai, Delhi, London to New York--and enviable art collections. But then greed caught up and the fall was as precipitous as the rise.
Shady deals, money laundering, illegal transactions and kickbacks are some of the charges these once-powerful bankers are now facing.
As their dealing with unscrupulous promoters are investigated, Moneycontrol looks at the fallen stars of the banking industry.
ICICI Bank’s Chanda Kochhar
Chanda Kochhar broke many glass ceilings as she rose through the ranks to lead ICICI Bank in an industry notorious for being male-dominated.
She wasn’t just a star at home, international media houses queued up outside her office for interviews. They just couldn’t get enough of Kochhar. No banking conference was complete without her speech and her comments on the economy and banking industry were closely watched.
If Kochhar’s rise was an inspiring tale, her fall is a bigger lesson for management students. Kochhar joined the private bank as a management trainee in 1984. Mentored by the likes of KV Kamath and Narayanan Vaghul, Kochhar was instrumental in building the bank’s retail business.
It was all going swimmingly well, until 2016 when whistleblower Arvind Gupta, a Delhi-based activist, wrote to the Prime Minister’s Office, the Reserve Bank of India and other authorities pointing to suspicious financial transactions between the bank, Kochhar’s husband Deepak and Videocon chief Venugopal Dhoot. When a newspaper wrote about the alleged irregularities, there was no place to hide.
In 2008, Dhoot floated an equal joint venture NuPower Renewables with Deepak Kochhar and lent Rs 64 crore to the firm and later transferred the entire stake to Deepak.
Four years later, ICICI lent Rs 3,250 crore to the Videocon group companies as part of a Rs 40,000-crore consortium loan deal. The CBI says the two deals are connected.
Initially, the ICICI Board gave a clean chit to Kochhar and defended her before finally agreeing to an internal probe. Later, the bank terminated Kochhar denying her retirement benefits. As the investigation began, Kochhar was sent on leave in June 2018 and resigned four months later following an internal probe by the bank. The bank, Dhoot and Deepak deny any wrongdoing. The Enforcement Directorate, which is also probing the case, seized assets of Deepak’s firm.
“Kochhar case is a major lesson to all top executives on how you should strictly draw a line between profession and family,” said a senior banker on condition of anonymity. “The argument that the board didn’t know about the conflict of interest in the Videocon deal doesn’t stand.”
On 23 December, the CBI arrested Chanda and Deepak Kochhars in connection with the Rs 3250 crore Videocon loan scam, over a decade after the quid-pro-quo deal took place.
Yes Bank’s Rana Kapoor
Big borrowers just loved Rana Kapoor. And he returned their affection wholeheartedly, provided they shelled out fat upfront fees on loans.
The Yes Bank founder was generous, willing to give loans no matter how problematic the account was. Most decisions were taken by Kapoor at his Mumbai’s Samudra Mahal residence, which was once the home of fugitive diamond tycoon Nirav Modi whose extradition trial resumed in a London court on September 7.
Play big, earn big was Kapoor’s mantra. Play big, he did. About 10-15 percent upfront fee on every loan at the time of disbursal was the norm, say investigators. This helped to grow the loan book, fee income jumped but so did the risks.
Kapoor, who had a penchant for mega events, struck several quid pro quo deals, according to investigators.
One such was with DHFL’s Wadhawan brothers—Kapil and Dheeraj. Kapoor gave loans to the Wadhawans in return for kickbacks to his family, the Enforcement Directorate said in its first charge sheet.
In April 2018, Yes Bank gave a loan of Rs 3,700 crore in short-term debentures to DHFL. The money wasn’t paid back, ED officials said. Yes Bank sanctioned a loan of Rs 750 crore to Belief Realty (BRPL), a company owned by DHFL promoters by the Wadhawans.
In return, the Wadhawans paid a kickback of Rs 600 crore to Kapoor and his family members as a loan from DHFL, the ED said.
This loan was extended to DoIT Urban Ventures, one of the many shell companies owned by the Kapoor family. Kapoor’s three daughters are 100 percent shareholders in DoIT through Morgan Credit Pvt. Ltd (MPCL), another family-owned firm.
The Rs 600-crore loan was sanctioned based on mortgage of sub-standard properties, including a 7.79-acre parcel in Alibaug and 91.63 acres at Raigad. Kapoor’s daughter Radha gave a personal guarantee showing a net worth of Rs 1,386 crore, according to ED documents.
Of the Rs 600 crore, DoIT used Rs 300 crore for repaying an earlier loan. The remaining, the company said, was for general corporate purposes.
There were many such deals and Kapoor was arrested by the ED early this year.
Kapoor was arrested by the federal investigating agency under the Prevention of Money Laundering Act (PMLA) in 2020.
“I still remember the day when I got a call from him. He asked me to come home and my association with the bank started that evening. He decided practically everything,” said a senior executive who was previously associated with the bank.
The Delhi High Court on November 25 granted bail to Kapoor.
DHFL’s Wadhawans
If Kochhar and Kapoor were the superstars of the banking world, Wadhawans ruled the non-banking finance company (NBFC) industry, particularly mortgage lending.
The fall of Kapil Wadhawan, whose family built one of the most fascinating mortgage businesses in India, was quicker than his rise.
Even if one sets aside the criminal element to the story, DHFL’s collapse is an exemplar of how promoters can destroy a successful business by growing too big, too fast.
For almost two decades, DHFL lorded over India’s booming housing finance space. With total assets under management of over a trillion rupees and an aggressive approach to the fast-growing affordable housing market, DHFL was leagues ahead of the competition, old and new.
Banks and investors queued up at Wadhawan’s office for business. The firm’s shares hit a peak of Rs 690 on September 3, 2018, a value higher than that of some of the full-fledged banks.
And then it all came crumbling down. A mix of factors —financial failures and illegal transactions—led to the fall of Wadhwans.
In May 2020, the Wadhawans were arrested by the ED in the Yes Bank money-laundering case. The Supreme Court recently rejected their bail plea.
DHFL’s misery wasn’t confined to its financial situation. The Wadhawan brothers, says ED, were doing business with the underworld as well.
According to the Enforcement Directorate, the Wadhawans had real-estate dealings with deceased alleged drug trafficker Iqbal Mirchi, a close aide of India’s most wanted gangster Dawood Ibrahim. They allegedly met Mirchi in London, where he lived after leaving India.
Kapil allegedly created a string of shell companies to facilitate financial transactions and to purchase prime properties belonging to Mirchi’s family in Mumbai’s Worli area.
The Wadhawans allegedly also routed money from DHFL to the shell companies in which Kapil had a share. DHFL, at one stage, was used as a piggy bank by Wadhawans, who had unquestionable control over it.
Early this month, the Delhi High Court has directed that a trial court's order granting bail to Kapil Wadhawan and his brother Dheeraj shall not be given effect to till February 1, next year.
IL&FS’ Ravi Parthasarathy
Next only to DHFL, IL&FS was a giant of India’s NBFC space, till it collapsed like a pack of cards in 2018. Ravi Parthasarathy was the chairman of the group and unlike others, he kept a low profile.
NBFCs had a successful run in the years that followed the global financial crisis of 2007-08. NBFCs lent to every company which was turned down by banks. The assumption was that the economy would continue to boom but then came 2013 and the downfall.
Worsening economic situation, high bad loans and a liquidity crunch forced IL&FS into the crisis.
Also read: IL&FS saga: Here are answers to the Rs 90,000-crore questions investors have been asking
According to an SFIO charge sheet, six executives–Parthasarathy, Hari Sankaran, Ramesh Bawa, Arun Saha, Vibhav Kapoor and Karunakaran Ramchand —committed fraud, harming the interests of the company, shareholders and creditors, resulting in a wrongful loss.
A panel headed by veteran banker Uday Kotak is in the process of reviving IL&FS. As Kotak has admitted, the path is far from easy.
Parthasarathy passed away in Mumbai early this year.
The organisations, be it ICICI Bank or Yes Bank, have moved on and are busy rebuilding business and image. There are a lot of unanswered questions on the role of executives and board members who connived to cheat the institutions they were instrumental in building.
For now, these bankers seem to have traded infamy and ignominy for stardust.
(This is an updated version of an earlier story published on Moneycontrol in September, 2020)
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