RBI checking Yes Bank loan exposure to IL&FS, DHFL, NBFCs – Livemint

RBI checking Yes Bank loan exposure to IL&FS, DHFL, NBFCs – Livemint

In its second quarter results, Yes Bank disclosed an exposure of ₹2,600 crore to IL&FS. Photo: Abhijit Bhatlekar/Mint

In its second quarter results, Yes Bank disclosed an exposure of ₹2,600 crore to IL&FS. Photo: Abhijit Bhatlekar/Mint

Mumbai: The Reserve Bank of India (RBI) on Monday began inspecting Yes Bank’s exposure to Infrastructure Leasing and Financial Services Ltd (IL&FS), Dewan Housing Finance Corp. Ltd (DHFL), Indiabulls Group, and Sudhir Valia-promoted entities Fortune Financial Services India Ltd and Suraksha ARC, two senior officials aware of the matter said.

RBI’s banking supervision team is currently looking at all statements since the date of sanction of loans to these accounts, internal and statutory auditor observations and terms of disclosures, among other documents. The inspection is a follow-up to a letter that the central bank wrote to Yes Bank last Thursday seeking detailed statements regarding these exposures.

“RBI is trying to see the interconnectedness between Yes Bank and non-banking financial companies (NBFCs) against the backdrop of the IL&FS crisis,” said one of the officials cited above. “These investigations are different from the annual inspection, as they are quick and targeted in nature. However, there is nothing unusual.”

A spokesperson for Yes Bank did not comment till the time of going to press.

In its second quarter results, Yes Bank disclosed an exposure of ₹2,600 crore to IL&FS, which is currently standard on the bank’s books. The bank also has 3.2% of its loan book exposed to housing finance companies and 2.6% to NBFCs.

Since September this year, both banking and markets regulators have been looking at the spillover effect of the payment defaults by IL&FS and its group companies, which led to a liquidity crunch in the banking system. This was followed by the abrupt sale of Dewan Housing bonds held by DSP Mutual Fund for a loss, fearing redemption pressures.

The Securities and Exchange Board of India has also sought details from mutual funds about their exposure to all NBFCs and housing finance companies. The mutual fund industry cumulatively held securities worth ₹2,800 crore sold by IL&FS and its related entities.

Bloomberg reported on Monday that two mutual funds, Reliance Mutual Fund and Franklin Templeton, had invested in non-convertible debentures sold by Yes Bank co-founder and chief executive Rana Kapoor’s private investment company, Morgan Credits Pvt Ltd. Kapoor’s family, which holds 3.04% of its Yes Bank stake through Morgan Credits, used the vehicle to monetize its shares without pledging them, the report said.

On Monday, Yes Bank lost 3.89% to ₹187.95 on BSE, underperforming the benchmark Sensex’s 1.07% gain.

Last year, Yes Bank reported a divergence in the way it accounted for its non-performing assets.

In September, RBI rejected the bank’s proposal to extend Kapoor’s term as the chief executive and set a deadline of 31 January to find a successor. This was followed by multiple exits by board members, including those of Ashok Chawla and R. Chandrashekar.