Moneycontrol
Last Updated : Sep 28, 2018 09:11 PM IST | Source: Moneycontrol.com

Yes Bank denies hiding bad loans, manipulating stock price

On September 27, Yes Bank shares ended lower by 9 percent in trade, taking the five-day fall in the stock to nearly 50 percent

Beena Parmar @BeenaParmar

In the dock for under-reporting of bad loans, Yes Bank, has denied any “window dressing” of corporate loans to conceal its non-performing asset (NPA) status.

The lender has also refuted allegations that it inflated its share price ahead of key fund-raising activities. It denied parallel dealings with “Three Sisters Family Office”, which manage personal investments of the current Chief Executive Officer and Managing Director Rana Kapoor and his family.

In a filing with the National Stock Exchange (NSE) it said, “The bank has been regularly making disclosures in terms of SEBI circular on “Disclosure of divergences in the asset classification and provisioning by banks” dated July 18, 2017….As mandated and required under regulations, the bank has been making all disclosures to stakeholders on NPA divergence related findings made by the regulator.”

This was also “validated by Statutory Auditors BSR and Co. on a quarterly basis”, Yes Bank said.

The bank pointed out it is the subject of a comprehensive annual risk-based supervision by the banking regulator, Reserve Bank of India (RBI).

NSE seeks details

The clarifications come in response to queries sent by NSE after it received a written complaint making certain allegations against the bank.

The RBI also came down heavily on Yes Bank on September 17, to cut short Kapoor’s tenure as the CEO to five months until January 31, 2019 without citing any reasons.

On September 25, Yes Bank’s board decided to request the central bank to extend Kapoor’s term till at least April 2019. But Moneycontrol sources suggest RBI is unlikely to accept the request.

Previously, the reappointment was proposed by the bank’s board and shareholders for three years until September 2021.

Parallel business activity

In its clarification, NSE had also asked the bank about the parallel lending/investing business being run by Kapoor’s family office compromising the interest of Yes Bank.

In response, Yes bank categorically said in one sentence that the bank has “no dealings with the Three Sisters Family Office”.

Stock price manipulation?

In another query, NSE accused Yes Bank of influencing market participants to artificially inflate/support the bank’s share price before key events like equity raise/QIP (qualified institutional placement).

Yes Bank responded it was fully compliant with disclosures of fundraising activities and it had followed all guidelines.

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.

NSE also raised questions on non-compliant facilities sanctioned by camouflaging end uses or transactions done by Nirma, Monnet, Binani, etc.

While saying it was fully compliant with “bonafide” end uses, Yes Bank said it cannot share customer-specific information as per confidentiality rules.

Hiding NPAs?

On being questioned if the rise in NPAs was being noted by the audit committee, Yes Bank said its gross NPA ratios are among the finest in the banking industry and the internal control over financial planning is audited with BSR and Co (KPMG), that has given an “un-qualified opinion” on it.

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 FY16 ending March 2016, Yes Bank reported a divergence of Rs 4,173 crore and in FY17 the divergence increased to Rs 6,355 crore.

The bank also pointed out it has made appropriate disclosures while appointing Raj Ahuja as the Chief Financial Officer (CFO) to replace Rajat Monga, who is now proposed by the board to be its Executive Director.

On September 27, Yes Bank shares ended lower by 9.14 percent in trade, eroding nearly half of its market capitalisation from Rs 91,000 crore on 20 August.
First Published on Sep 27, 2018 07:57 pm
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