Rana Kapoor spent Sunday night in custody, not in his own bed. The founder of Yes Bank had been awake for more than 24 hours before financial crime detectives took him in. “I haven’t slept a wink,” he told officials. He said he was willing to cooperate. They said he was not cooperating enough.
The arrest came one day after the Reserve Bank of India seized control of Kapoor’s bank. That same day, the central bank slapped a withdrawal limit on depositors. No one could take out more than Rs 50,000 during a one-month moratorium. For a bank holding $28 billion in deposits, that is a jarring cap.
How a lender fell apart
Yes Bank did not collapse overnight. It had been struggling with bad loans for months. The bank tried to raise capital to cover potential losses. It failed. Credit rating agencies downgraded the bank’s debt. That made raising money even harder. The central bank stepped in when the bank could not fix itself.
The Enforcement Directorate had already been investigating Kapoor for money laundering and other financial irregularities before the arrest. The agency accused him of criminal conspiracy and cheating. The alleged total involved is around $581 million. Kapoor denied the allegations. He said he was ready to talk to investigators “day and night.” The agency said he was not cooperating. They arrested him on Sunday, March 8, 2020.
Customers caught in the middle
For ordinary depositors, the news was alarming. A bank that held their savings was now under government control. Withdrawals were capped. The moratorium meant that for 30 days, most people could not access large sums of their own money. India’s banking system had not seen this kind of intervention in years.
Yes Bank is one of India’s biggest financial institutions. It is not a small regional lender. Its troubles sent a signal through the entire banking sector. If a bank of this size could fail to meet regulatory requirements, what did that mean for other lenders?
The background that matters
Kapoor founded Yes Bank in 2004. He built it into a major player in Indian banking. The bank grew fast, lending aggressively. When the economy slowed, many of those loans turned bad. The bank’s financial position weakened. Kapoor tried to raise fresh capital. He could not find enough investors willing to put money in.
The Reserve Bank of India stepped in when it became clear that Yes Bank could not solve its problems alone. The central bank seized control and imposed the withdrawal limit. That was the trigger for Kapoor’s arrest the next day. The Enforcement Directorate had been building its case for months. The bank’s seizure gave the agency the opening it needed.
Kapoor now faces charges that could keep him in custody for a long time. The investigation is ongoing. The bank’s depositors are stuck waiting. The one-month moratorium will end eventually. What happens then is uncertain. For now, the founder of Yes Bank sits in detention, and his bank sits under government control. Two things that once seemed unthinkable have become facts on the ground.
