Yes Bank Audit Reveals Fund Rounding In Rs 500-Crore Loan Sale To Suraksha ARC: Reports

A special audit into Yes Bank Ltd. has revealed that the transfer of non-performing loan of Housing Development and Infrastructure Ltd. to Suraksha Asset Reconstruction Co. for Rs 518 crore might have been processed through governance gaps and procedural lapses, according to reports.

According to the audit, Yes Bank may have indirectly financed the purchase of its stressed asset. The sale of the asset also included 15% of the sale amount in cash as a safety margin. However, the auditors suspect the cash margin may have actually come from the money lent by Yes Bank itself.

The transition took place in 2017, when the bank sold the non-performing asset worth Rs 523 crore to Suraksha ARC for Rs 518 crore. However weeks before the sale, Yes Bank had given close to Rs 199 crore in loan to Fortune Integrated Assets Services Ltd. This is a company that is linked to the Suraksha group.

Later in March 2017, the bank increased the company's borrowing limit by another Rs 100 crore and according to the audit, some of this money could have allegedly appeared in the Suraksha ARC's account to acquire the non-performing loan. This indicates that the bank may have indirectly funded the purchase of its own bad loan.

Interestingly, when Suraksha ARC took over the load, it was valued at Rs 523 crore, but the value had grown to Rs 700 crore after the completion of insolvency proceedings. However, at the current value of Rs 150 crore, the company will be looking at a loss of over 75%.

Among other issues, the sale had no competitive bidding or independent valuation, which indicates that the bank could have received a better price for the loan. Allegedly, certain stressed accounts that were on the verge of becoming non-performing assets were sold without proper disclosure or market testing.

The audit has also revealed that Suraksha ARC was the dominant buyer of Yes Bank's distressed assets between 2016 and 2018. The company, during the period, had acquired exposures worth Rs 2,700 crore. In fiscal 2017, the company bought 98% of such sales. This raises concerns over potential preferential treatment.