B-Schools Start To Distance Itself From Yes Bank Founder – Rana Kapoor?

Will business schools in India distance themselves from Yes Bank founder – Rana Kapoor? Kapoor had been in the advisory panel of few prominent business schools in India and has also been the guest of honour with institutes like IMT Nagpur, We School (Welingkar) to name a few.

Rana Kapoor - IMT nagpur

Chief Guest Rana Kapoor at the 11th Convocation, IMT Nagpur

The YES Bank disaster has shaken up the banking sector of India and business schools in India also seem to get indirectly affected by it. On March 5, YES Bank was put under a moratorium and the RBI superseded its board despite the central bank and the SBI being united to save the Bank from further downfall. And, in the midst, its founder and former YES Bank boss Rana Kapoor is being investigated by the ED for alleged money laundering now.

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According to the latest reports, the total exposure of Yes Bank could be over 2.25 lakh crore but of that, the non-performing assets (NPA) are reportedly around Rs 42,000 crore. As per officials of the Enforcement Directorate (ED), grilling Rana Kapoor, of these Rs 42,000 crore loans that turned into NPAs, Rs 20,000 crore were allegedly offered to some corporate companies and Non-Banking Financial Companies (NBFCs) on Rana’s orders.

Who is Rana Kapoor?

Kapoor was born in 1957 in Delhi. He completed his schooling from Frank Anthony Public School in 1973 at New Delhi and went to complete his BA degree from SRCC college, University of Delhi, in 1977. Kapoor received his MBA degree from Rutgers University in the US.

Kapoor started as a junior banker in Bank of America’s in New Delhi. He worked with the bank for over 16 years, until 1996. After working as the general manager and country head in ANZ Grindlays from 1996-1998, Kapoor joined his brother Ashok Kapur and Harkirat Singh to form Rabo India Finance, an NBFC in 1998.

All the three partners had 25% equity while the remaining 75 per cent equity was with the Netherlands headquartered Rabobank. Ashok, Rana and Harkirat sold their equity in the enterprise in 2003 and got the license to set up a private sector bank in the same year.

Even though YES Bank failed because of high non-performing assets (NPAs), Rana Kapoor was once known for his unparalleled shrewdness to recover every penny lent to the most astute and dubious clients, which also earned him the title of the ‘lender of the last resort’. His clients included Vijay Mallya and Deccan Chronicles.

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The Growth Of Yes Bank and Rana Kapoor

The procedure was simple as banks would composedly move NPAs among themselves whenever they got the slightest an idea of a loan turning into bad debt. This simply means Bank X selling a bad loan to Bank Y and reassuring that it will buy the asset back at the same price later. Doing this does not add much value but what it does is it saves these private banks from the radar of the RBI.

In 2015, global financial services firm UBS published a negative report about the asset quality of YES Bank’s books. After this setback, Kapoor promptly filed a complaint against the firm with the capital market regulator. Kapoor called the findings of UBS as “biased”, “motivated” and unrealistic.

Despite being extremely well networked, Kapoor lost the war of perception in FY17. This was the second time that YES Bank reported a gross divergence in bad loans of Rs 6,355 crore. The actual lender of the last resort was less than pleased and this is the exact event that led to Kapoor’s exit from YES Bank