HOW TO BUST A BANK

From flamboyant leader with a stomach for risk to a man whose overweening ambition ran a bank aground, the story of disgraced YES Bank founder-chairman Rana Kapoor

- ANAND ADHIKARI

Rana Kapoor was not part of the banking licence plan when Ashok Kapur and Harkirat Singh prepared a blueprint for the new-generation YES Bank. The two had been colleagues at Grindlays Bank, and knew each other personally, professionally and socially. Kapur arguably sneaked in the relatively younger Rana, his co-brother-in-law (their wives were sisters) as co-promoter. Singh didn’t know Rana personally or otherwise while Kapur carefully hid the fact that they were related. The foundation of a public trust institution thus was based on a tactical omission.

Regardless, the trio, armed with an ‘in principle’ licence from the Reserve Bank of India (RBI) in 2003, set up the private bank from scratch in 2004. Singh left within a year, alleging that Rana and Kapur had teamed up against him. In 2005, YES Bank successfully raised Rs 355 crore in capital through an IPO, with the shares valued at Rs 45 each. The next step was to find a sustainable business model. Both Kapur and Rana knew public sector banks were en route to losing market share. Retail banking was the flavour of the season, with the top banks—ICICI, HDFC and SBI— vying for the home loan, car loan and credit card space. “Corporate banking was a natural choice for us because of the lack of big capital for retail banking,” Rana once said. Corporate banking was also an area he had enough expertise in, given his stints of 15-odd years with the Bank of America and ANZ Grindlays Investment Banking.

By 2008-09, the small-sized bank had a balance-sheet size of Rs 22,900 crore and a loan book of Rs 12,403 crore. Then, Ashok Kapur met a sudden and unfortunate death during the 26/11 terror attacks in Mumbai, and the bank fell into the lap of the less experienced Rana. Under him, YES Bank’s loan book grew by a startling 10 times, to Rs 2.41 lakh crore from 22,193 crore in the 2009-19 decade.