By Admin 
Yes bank – buksha arc deal: A special audit report, investigating the old transactions of the YES Bank, has indicated serious procedural flaws and suspected use of funds in a large loan deal of ₹ 500 crore. The case is of 31 March 2017, when the bank sold a poor loan of about ₹ 523 crore (including interest) of Housing Development and Infrastructure Limited (HDIL) to ₹ 518 crore to the security asset reconstruction company (ARC) for ₹ 518 crore.
The bank claimed that it received a 15% cash margin, but the audit investigation found that the amount was probably indirect from the same bank – that is, the buyer, the company got the money from the bank for shopping. The audit report has described it as a suspicion of “fund round-tripping”.
Scam revealed in special audit
According to the investigation, just before the deal, the YES Bank, a security group company Fortune Integrated Assets Service Ltd. Approved a term loan and cash credit facility of ₹ 199 crore. In March 2017, this cash credit limit was increased by ₹ 100 crore. It is alleged that a part of this fund reached the account of security ARC directly, which paid for purchasing HDIL loan.
The report states that such transactions are a serious threat to the bank’s internal control system and risk management. In many cases, companies associated with groups were allowed to fill cash margins in the ARC deal, weakening the real purpose of selling bad loans. The special audit also revealed that there was neither open bidding nor independent valuation in this deal. Even some SMA-2 category accounts, which were on the verge of becoming NPAs, were also sold without market investigation.
NPA sold after breaking rules
Security ARC, between 2016 and 2018, emerged as the biggest buyer of the distributed assets of YES Bank. In FY 2017, this ARC alone bought 98% of the bank’s assets, which raised questions of possible bias. HDIL loans had 14.25% interest and additional 2% penalty. When the security ARC claimed its claim in the insolvency process, this amount had increased to about ₹ 700 crore. But according to the proposed solution plan, ARC is expected to get only about ₹ 150 crore – ie loss of more than 75%.
These conclusions re -raise questions on the loan and reorganization decisions taken before the YES Bank 2020. After the report surfaced, the eyes of regulatory agencies and investigating officers are on this deal. If the investigation proved to be a disturbance in the investigation, then this matter can become not only the bank and security ARC but also the major change for the entire asset recovery sector.
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