Rana Kapoor: A veteran banker who never said no to risky loans

Rising profits boosted the share price with Kapoor’s holding turning him into a billionaire.

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Kapoor was ousted by the RBI last year and his shares in the bank, which he once described as never-to-be-sold “diamonds”, were offloaded by lenders who had them under pledge.
The word about Yes Bank in finance circles was that it was a lender which never said no to risky borrowers who had built a highly leveraged position. Veteran banker Rana Kapoor used his networking ability to lend and recover loans, distinguishing the bank from others which depended more on process rather than relationships.

When the business cycle turned and the central bank became tough on bad loans, Yes Bank ended up with a disproportionately high level of non-performing assets (NPAs) with a presence in almost every stressed account — whether it was DHFL, IL&FS, the Anil Ambani Group, Essel Group and many other troubled borrowers.

Kapoor was ousted by the RBI last year and his shares in the bank, which he once described as never-to-be-sold “diamonds”, were offloaded by lenders who had them under pledge. His successor Ravneet Gill has been struggling for a year to keep afloat the bank that Kapoor built, but ran out of time with the RBI pulling the plug on Thursday.


Kapoor, who started his career as an intern with Citibank New York, joined Bank of America in 1980 and led its wholesale banking business in Asia. He headed ANZ Grindlays’s investment bank, then the largest in India, up to its acquisition by StanChart in 1998.

It was at this point that Kapoor began the pursuit of his dream to set up his own financial institution by floating Rabo India Finance with brotherin-law Ashok Kapur and another banker Harkirat Singh.

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In 2003, Kapoor and Kapur floated Yes Bank — the second time that the RBI was experimenting with granting a banking licence to professionals. The time was fortunate, as a year later another professional-promoted institution — Ramesh Gelli’s Global Trust Bank — folded up.

Rising profits boosted the share price with Kapoor’s holding turning him into a billionaire. A large part of the bank’s profits came from the upfront fees that it earned on risky term loans.

Many bankers feel that Kapoor would have been better off had he agreed to sell his stake to new promoters and exited from Yes Bank in 2017. However, despite being ousted by the RBI, Kapoor fought back and swore never to sell his shares.

As luck would have it, Yes Bank’s woes worsened with a series of unexpected defaults hitting it in quick succession, beginning with IL&FS and DHFL. While his successor Gill tried his best to bring in new investors, the spate of defaults and their slow resolution in the bankruptcy courts turned investors sceptical. Ultimately, the RBI had no choice but to use its ultimate weapon of placing the bank under moratorium.

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Even after launching the bank, Kapoor had three major setbacks. First, his brother-in-law and co-promoter Kapur was killed at the Taj hotel in Mumbai during the 26/11 terror attacks.

Soon thereafter, the global financial crisis broke out and there was a credit squeeze, with Yes Bank being badly hit because of its dependency on wholesale loans. However, the subsequent easing by the central bank and government support helped the bank get back on its feet almost immediately. The third was a boardroom battle with Madhu Kapur, his sister-in-law. While this ended in a truce, Kapoor did not have the satisfaction of having his own people on the board.

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When the going was good, Kapoor used his stake to raise around Rs 630 crore by pledging his shareholding in the bank through two promoter entities — Morgan Credit and Yes Capital. However, as the share price of his bank collapsed, lenders began selling all his holding, pushing down the share price even further, and thereby hurting the revival plans of the bank as well.
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