The Banker Who Crushed His Diamonds

by Furquan Moharkan

  He is said to have been amongst the three candidates shortlisted by ANZ Grindlays. But he once claimed in an interview with financial daily Business Standard that he was rejected since the other two were sons of senior bureaucrats, a claim which sounds dicey given the accounts of the people he later worked with. Meanwhile, Bank of America, which was his last preference, offered him a job and he stayed there for fifteen years.

  It was here that he was moulded into what he would later on become. He joined as a management trainee in the bank and, owing to his street-smart ways, climbed up the ladder fast, winning many awards during that time.

  In fact, the people who worked in Bank of America at the time say that he was the blue-eyed boy of then India head Vikram Talwar. Rana, by the early 1990s, rose up to head the corporate banking of Bank of America in India. With his cabin right next to Talwar’s, Rana was considered the defacto number two of the bank in India. Many say that he was result-oriented—no matter the cost—a trait usually associated to bankers on Wall Street.

  However, his dealings in Bank of America never seemed suspicious to his colleagues. ‘Given the scrutiny in the Bank of America, it was impossible for him to do any fraudulent transaction. I don’t think he would have done it there. But he was always on the borderline,’ a colleague who had worked with him there told me.

  What were those borderline fraud symptoms that he had shown over the years? Well, probably lobbying—the two things which seem to be the key to the rise of YES Bank later.

  ‘He was known as a fixer. He was one of those officers who knew people in power. He knew bureaucrats. So, he used to get things done quickly,’ one of his colleagues who had observed his spark confessed.

  But, at the bank, his performance was excellent. In 1990, he left the circles of India’s foreign banks bewildered. He had been able to get on board a big account for Bank of America. The account was that of the US consular business in India, which until then had shared a decades-old relationship with its rival foreign bank—Citibank. The account, going by the vivid memories of the people working in Bank of America back then, was roughly pegged at Rs 200 crore—a big amount for a foreign bank in India at that point in time.

  In fact, he was presented the Eagle Pin by the chairman of Bank of America in 1990, the highest professional recognition for consistent performance and excellence at Bank of America, amongst several other enterprising achievements.

  This was the time around which he got into the groove. But as all good things come to an end, so did his honeymoon with Bank of America. In 1992, a scam erupted that shook the fundamentals of the Indian financial system. Harshad Mehta, the poster boy of stock markets, had siphoned off Rs 1000 crore from the country’s public sector banks and pumped it into the markets—causing an abnormal annual return of 274 per cent on the BSE

  Mehta thrived on the loopholes in the system. Back then, the statutory liquidity ratio—minimum percentage of demand and time deposits that banks have to maintain in the form of bonds or other liquid assets—stood at 38.5 per cent. In case of temporary surge in deposits, rather than actually going out in the market and buying bonds, the banks back then would resort to ready forward deals (RFDs)—short-term inter-bank lending through buying and selling of government bonds. As the ticket size of actual bonds was far higher than those of bonds, instead of actually transferring the bonds the banks would transfer something called bank receipts (BR)—an ‘I owe you’ note. In a normal RFD, there would be only two banks involved. Securities would be taken from a bank in exchange for cash. All this was facilitated by brokers like Mehta. Since the market was nascent back then, brokers slowly creeped into the settlement process of these RFDs. Mehta managed to convince the banks to have the cheques drawn in his name. He would then manage to transfer the money deposited in his account into the stock markets, which, in turn, caused a bull run in the market.

  Once the Harshad Mehta scam was unearthed, other than giving statutory powers to then four-year old Securities Exchange Board of India (SEBI) and the mandatory arrests of the people involved in the fraud, there was a much-required churning in the Indian banking system. Some top executives stepped down, some were suspended, some were dismissed while others were transferred.

  Talwar, Rana’s favourite boss, was among those who were transferred to San Francisco.

  Though there was no conduit that took place under Talwar, a senior journalist who covered the SEBI scam back then said that Rana’s flamboyance helped his image in front of Talwar, who himself was flamboyant.

  ‘The memory I have of Vikram Talwar at Bank of America is very hazy. It is more from a picture created by those who knew him or had met him,’ the journalist who covered the scam told me during an interview for this book. A link seems to have been created and reinforced after Rana started becoming a name in the business world, according to the veteran.

  Vikram Talwar did mentor and influence many people, like Vishwavir Ahuja of RBL Bank who was earlier with Bank of America. Talwar was, in fact, his local guardian when he was studying at Michigan University.

  The suggestion here is that the flamboyance in Rana Kapoor’s stance came from, or was modelled on, Talwar.

  But that is where the similarities end. ‘Talwar had his style and flamboyance. He also had charm and didn’t annoy or offend. He had a way of working with people,’ say many people who worked with both of them.

  In an interview with Patricia Olsen of the New York Times, Talwar said that he’d learnt an important lesson from his parents, a working couple: how to work with people and how to deal with co-workers. ‘No one should see you as arrogant or artificial,’ he had said.

  Rana, on the other hand, lacked Talwar’s charm. He could ‘offend’ and ‘rub people up the wrong way’ according to Bank of America insiders.

  Rana seemed to have his own style probably influenced by Rutgers University rather than Talwar, the same veteran journalist told me.

  Even as some other former Bank of America employees say that there’s no evidence of mentoring or favouring (of Rana) by Talwar, Rana did get ‘latitude’ in the way he could function.

  ‘Fingers were pointed at Talwar, but (during the scam time) there was no evidence or substance in the charges. And as far as Rana was concerned, the charges came later and didn’t involve the scam or Talwar. At least that was what it seemed to be on the face of it. The link between them came from their shared flamboyant lifestyles and people drawing similarities and the image that was built around Rana later. He tried building an image for himself —columns in newspapers which were probably done for him as he was too busy at the time. Anyway, the mud that stuck came later. This kind of acquired verve and flamboyance also made people feel that he was influenced by his association with Talwar during the Bank of America period,’ according to the veteran journalist.

  ‘I would say my first job was a developmental and learning phase where I imbibed the basic tenets of banking,’ Rana had said in 2003, in an interview to business daily Financial Express.

  The new head who came in was a hardcore banker who followed the rule book strictly—Ambi Venkateshwaran. Rana’s new boss was not very fond of his style of functioning and he was sidelined.

  ‘He (Ambi) was suspicious of him. Every time he got a new project, it was delegated to someone else to vet through. In some cases, it was shelved,’ a common colleague of theirs told me once.

  The constant sideliningg by Ambi became the ultimate reason why Rana Kapoor left the Bank of America and found his calling at ANZ Grindlays—a bank against which he nursed a grudge for not recruiting him fifteen years ago.

  The way he used to function under Talwar wasn’t going well with Ambi. In 1996, the protocol had not been followed when sanctioning a huge credit line to one of the country’s largest corporate houses. This upset Ambi, who forced him to resign, one of the co-workers at Bank of America told me. While Rana might have resigned from the bank, it was because of Ambi, who never liked Rana’s way of functioning, that he had to forcibly
leave, yet another veteran journalist who has tracked Rana’s life closely confirmed. How Rana got into ANZ Grindlays is a story in itself. His brother-in-law, Ashok Kapur, was at the end of his career at ABN Amro while Rana was hunting for a job. Mehli Mistry, the then CEO of ANZ Grindlays knew Ashok very well as the latter had worked at ANZ. Ashok felt obliged to do something for his brother-in-law, as he was the elder of the two, the people who knew both Ashok and Rana told me. He got him placed at ANZ Grindlays’ investment banking division as its head.

  This incident reveals an interesting facet of Rana Kapoor’s personality. In a sector that’s often associated with a fondness for prudence, he had a ‘whatever it takes’ attitude. But, before he jumped ship, his colleagues made a very important observation about him: that he is a smooth-talker. That trait came to his rescue always. As the YES Bank chief, when he was on a suspicious lending spree, he remained the darling of most business journalists. In fact, eight hours before the ED swept over his posh Worli residence, he was calmly replying to my WhatsApp messages and claiming innocence, despite his fate being clear.

  In fact, when the bank had sent us a legal notice on 22 September, one fellow journalist called me up saying: ‘They have been doing it with journalists even for the smallest of negative stories about them.’

  Yet another person, who had formerly worked with the bank and been in the thick of such things, called and confessed that this has been Rana’s legacy, which the bank continued with even after Rana’s exit.

  This was an important insight into Rana Kapoor’s functioning: that smooth-talking was just a farce that he put up. It was a public relations tool that he used over the years. In case he didn’t see things going his way, he used to unleash the usual corporate weapon of ‘defamation’.

  This also brings us to the understanding of why there were no reports about the bank’s malpractices when they were actually happening. Most of the journalists who had covered the bank were swayed by Rana’s smooth-talking— an unusual trait in a high-profile bank chief—coupled with easy access to the ‘exclusive’.

  There is an important lesson in all this, both for the common man and the journalist. When there is an overdrive of PR for anyone, there are high chances of something fishy going on at the top. In the past year, there was yet another bank chief who was disgracefully forced to step down—Parvez Nengroo of Jammu and Kashmir Bank. Parvez, like Rana, used to go on a public relations overdrive, while multiple bank officers with clean records faced his wrath for not obliging to his unrealistic demands.

  Coming back to Rana’s stint with Grindlays Bank, it was these three years at the bank that led to the foundation of the institution that will go down in the annals of history as one of the biggest banking failures in India—whether it was intentional or not is what we will unravel through the course of this book.

  Rana formed a trio while there—with his brother-in-law Ashok Kapur and another gentleman, Harkirat Singh, whom he went on to betray after YES Bank was established. How? Read on to know.

  In February 1995, a team from Rabobank arrived in India, scouting for opportunities in the country’s expanding financial services market. Rabobank is a Dutch multinational bank and financial services company that saw a huge opportunity in the Indian market post the liberalization of the economy. Ashok Kapur came to know of this and informed Rana. Kapoor, his brother-in-law Ashok, and Harkirat Singh made a proposal to the visiting team for two joint ventures: a non-banking financial company and a bank. During the next year, Kapoor held meetings with Rabobank executives in India, Singapore and the Netherlands—laying the foundations for Rabobank, which would ultimately become the foundation for YES Bank.

  It was not only the idea of starting his own bank that got materialized during his stint at Grindlays, but he also worked for Jet Airways’ Naresh Goyal—the man who would later become one of the biggest defaulters of YES Bank. He helped Jet Airways raise funds for its fleet acquisition in the latter half of the 1990s.

  This was not his only big-ticket deal in Grindlays. The other one was helping Sunil Bharti Mittal of Airtel roll out cellular services in Delhi. Over the years, in the course of his public interactions, he has been flaunting about knowing Mittal for almost four decades now. He, by his own admission, used to play snooker at the Panchshila Club in south Delhi—one of the posh areas of the national capital —since both of them were sixteen. Even when Rana built an empire based in Mumbai, the city of Delhi remained alive in heart, at least that is what his alleged real-estate transactions indicate, which are detailed in the the ED chargesheet and talked about in the later chapters.

  As irony would have it a deal in Delhi was probably the start of his downfall, which culminated in India’s biggest banking failure and his ultimate arrest.

  At Bank of America, though he was an important cog in the wheel, he was away from the limelight. But at Grindlays he started to dream ‘big’, a lesson he had probably learnt from his first boss, Vikram Talwar. ‘It widened my perspective in corporate finance and investment banking, and involved considerable organisational, team and client development processes and the institutionalisation of the same,’ Rana said in his 2003 interview with Financial Express.2

  But that doesn’t mean he wasn’t working on his public relations during his time at Bank of America. His contemporaries were all high-flyers who had made a big name for themselves in the industry: Jaspal Singh Bindra, the executive chairman of Centrum Group (he was also the former group executive director and CEO for Asia at Standard Chartered Bank, or StanChart); V Shankar, now CEO of private equity (PE) firm Gateway Partners and former CEO of StanChart’s Middle East, Africa and Americas business; and Vishwavir Ahuja, the reticent managing director and CEO of RBL Bank (he was also Rana’s boss at Bank of America for a decade, a post Rana wanted to hold). But still Rana outshone them, all thanks to his PR skills. His image in the media was helped by two factors back then. He was among the first bankers to hire a PR team for himself, while he was still at Bank of America. Secondly, back then, unlike today, there were very few journalists who covered foreign banks. This gave him an added leverage of building a personal connect with those journalists.

  Rana Kapoor, through the accounts of the people who knew him, and as detailed in this book, was perceived as a shrewd, manipulative, aggressive and arrogant man. He was also considered flamboyant by the people whom I interviewed during the course of researching for this book.

  But for all his negative traits, Rana, in our interactions, came out to be a family man—a man who could go to any extent for his immediate family, a man who gave it all for his family.

  However, his love for his family was peculiar. Whatever he did, it was to secure the future of his daughters. But like at office, he was aggressive at home too. It was more like my way or the highway.

  Towards the end of 2012, Rana’s middle daughter—Rakhee Kapoor Tandon—was getting married. It was her sangeet ceremony. It was around 2 a.m. and most of the guests had called it a day. Exhausted, Rana’s wife, Bindu Kapoor, was resting in the sitting room. The three daughters, their cousins and friends were enjoying some drinks and dancing as was one of his daughters. Rana grew uncomfortable because of this. He walked up to Radha, took her to the side and slapped her hard, one of the people present at that function told me. The slap, in front of the other girls, was so hard that Radha’s earring fell off, the same person added. It was only after the girls got Bindu to intervene did the situation de-escalate.

  Yet, years later, in 2020, Rana would do everything from jail just to ensure that no harm befell his daughters.

  This was Rana Kapoor as a family man for you: loving, yet aggressive. At office, he was always seen as a cunning, ruthless and manipulative person, according to several of his co-workers who I have interacted with. As per one of his employees, he was a ‘maverick banker’.

  Such has been Rana’s aggression in his race to the top that while I interviewed dozens of people who seem to have suffered at his hands, none among them
was willing to go on record against him. Rana had established his reign on the basis of fear psychosis.

  Here, let me give you trivial information. Rana was so self-obsessed that he wanted the number nine in everything: his office at Nehru Centre was on the ninth floor, his car numbers ended in 99. The reason? Because he was born on the ninth day of the ninth month of 1957.

  Before we proceed, we have to keep in mind the family tree, which is very important to understand the dynamics at YES Bank. Bindu Rana Kapoor and Madhu Kapur are two sisters. Bindu is married to Rana Kapoor, while Madhu was married to the late Ashok Kapur. Both men were promoters of YES Bank. Shagun Gogia Kapur and Gaurav Kapur are Madhu and Ashok’s children. On the other hand, Radha Kapoor Khanna, Rakhee Kapoor Tandon and Roshini Kapoor are Bindu and Rana’s daughters.

  THE BIRTH OF YES BANK

  At the onset, let me warn you that this is the most boring chapter you’ll read in this book. But then I had no choice but to include it. This chapter details the birth of YES Bank and helps put the events that transpired into perspective. Once you know what happened when, you will come to know why it happened after all.

  The Birth

  On 30 March 2001, Harkirat Singh submitted an application to the RBI for a licence to commence commercial banking business under Section 22 (1) of the Banking Regulation Act, 1949.

  Section 22 (1) lays the ground rules for the bank to start its operations. ‘Save as hereinafter provided, no company shall carry on banking business in India unless it holds a licence issued in that behalf by the Reserve Bank and any such licence may be issued subject of such conditions as the Reserve Bank may think fit to impose,’ it says.

  The application also included a letter of intent from Rabobank International Holding. The application to the RBI for the grant of a licence to set up a new private sector bank in India named ‘Rabobank International Holding’ as a co-promoter of the proposed bank. The application contained full details of the credentials and track record of the three Indian partners and Rabobank International Holding, and the management structure, the business, financial plan and strategy of the proposed bank.