Author- Riddhima Mohanani (Manipal University)
TO THE POINT
The Yes Bank scam of 2020 marked one of the most significant banking crises in recent Indian history. At the center of the scandal was Rana Kapoor, the bank’s co-founder and former CEO, who allegedly misused his office by sanctioning huge loans without collateral to companies facing financial distress such as DHFL in return for personal kickbacks. These loans were extended in many instances without adequate due diligence and were later turned into gross NPAs, which shook the very financial foundation of the bank.
With the erosion of public trust and the tightening of liquidity conditions, the Reserve Bank of India (RBI) came out with an emergency restructuring plan. The RBI imposed a moratorium, appointed a new board, and arranged for capital support through a consortium of public and private sector banks. This quick regulatory intervention helped in saving Yes Bank from total collapse, instilled confidence among the depositors, and stabilising the banking ecosystem at large.
On the legal front, the case led to various investigations by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA) and charges under various sections of the Indian Penal Code (IPC) including criminal conspiracy.
ABSTRACT
The Yes Bank scam in 2020 was a major financial scandal that revealed serious problems in the way private banks are managed in India. The bank’s author, Rana Kapoor, was indicated of giving away large voluminous loans to companies that were formerly in trouble, in exchange for personal benefits and advantages. Many of these loans later turned into bad debts, causing the bank to lose money and public trust. This article explains what happened in the scam briefly, the laws that were broken, and how government agencies like the RBI and Enforcement Directorate responded and corrected the problem. It also looks at the bigger picture that what this scam teaches us about corporate responsibility, financial regulation, and the need for stronger checks in the banking system. The goal is to understand both the legal and real-life impacts of this high-profile case.
USE OF LEGAL JAGRON
Money Laundering –
The mode of disguising the source of illegally obtained money, normally by channeling it through a series of intricate succession of banking dealings or commercial transactions, Investigated under the Prevention of Money Laundering Act, 2002 (PMLA).
Wilful Default-
A failure to repay loan dues by a borrower despite having the capacity to repay, according to the Reserve Bank of India guidelines.
Non-Performing Assets (NPAs)-
Loans or advances for which the interest payment has remained overdue for a period of 90 days or further than that. Yes Bank eyed a sharp advancement in NPAs due to reckless lending.
Fiduciary Duty-
It is the duty of the officers and administrators to portray in the best interest of the company and the stakeholders but they violate for the self- interest based choices.
Enforcement Directorate (ED)
A specialized financial investigation unit within the Ministry of Finance responsible for enforcing economic laws such as PMLA.
Reconstruction Scheme-
A lawful process adopted by the RBI under the banking regulation act to reconstruct a failed bank and safeguard depositors.
THE PROOF
The allegations in the Yes Bank scam were not grounded based on speculation—they were supported by concrete financial trails, internal records, and findings from investigative agencies. According to the Enforcement Directorate (ED) and Central Bureau of Investigation (CBI), the former CEO and co-founder of Yes Bank, Rana Kapoor, gave voluminous large loans to non-creditworthy companies, specially to Dewan Housing Finance Corporation Limited (DHFL), Reliance Group companies, and Essel Group, despite their poor financial standing and ongoing defaults with other banks. These loans were allegedly expanded without proper risk assessment, often against weak or given without collateral, which directly violated banking norms and internal compliance procedures.
In return, entities linked to Rana Kapoor’s family reportedly received illegal financial benefits. For example, a company owned by Kapoor’s daughters, DoIT Urban Ventures Pvt. Ltd., received investments of over ₹600 crore from DHFL shortly after Yes Bank sanctioned loans worth ₹3,700 crore to the same group. This fiscal pattern established a quid pro quo arrangement, indicating a clear discordance of interest and criminal conspiracy. Additionally, the ED uncovered that Kapoor and his family held over 44 shell companies through which they routed unlawful finances and acquired high-value properties in London and Mumbai.
Further evidence came from the bank’s own balance sheets and audit reports. As per the RBI’s findings, a significant portion of Yes Bank’s loan book was found to be Non-Performing Assets (NPAs)—over ₹34,000 crore by the end of 2019. Despite clear signs of financial instability, Rana Kapoor continued to approve risky lending practices, thereby putting public deposits and stakeholder trust at severe risk. The situation escalated to the point where the RBI had to impose a 30-day moratorium in March 2020, capping withdrawals at ₹50,000 to prevent a panic-driven run on the bank.
Multiple digital transactions and email trails were also retrieved during raids conducted by the ED. These communications revealed how key decisions were influenced and linked to personal enrichment rather than merit-based banking practices. The documentation of fund transfers, property purchases, and board-level approvals played a critical role in building a strong prosecutorial case. These records form the backbone of the legal charges filed under the Prevention of Money Laundering Act (PMLA), Indian Penal Code (IPC) Sections 420 (cheating), 120B (criminal conspiracy), and provisions of the Prevention of Corruption Act.
Thus, the proof against Rana Kapoor and his associates is rooted in a combination of forensic financial data, digital evidence, bank records, and money trails, all of which expose a deliberate misuse of power, systemic governance failure, and criminal manipulation of banking systems for personal gain.
CASE LAWS
Central Bureau of Investigation v. Rana Kapoor, 2020 (Enforcement Directorate Case File)
This is the main case based on the scam in which Rana Kapoor was arrested on charges of money laundering, cheating, and criminal conspiracy. The case is being probed by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act, 2002 and under Sections 420, 120B of the Indian Penal Code.
2- Reserve Bank of India v. Yes Bank Ltd., RBI Notification, March 2020
Using the powers granted by the Banking Regulation Act, 1949, the RBI made a legally enforceable Reconstruction Scheme for Yes Bank. It was considered as a quasi-judicial order and reorganized the bank board, suspended withdrawals temporarily, and allowed for capital infusion from other banking institutions. It is a precedent for regulatory action in private banking failure.
CONCLUSION
The Yes Bank scam was the most recent scam that happened in India. The scam is an example on the misuse of power, internal lack of accountability, and disregard for regulatory standards that can bring a large private bank to the verge of bankruptcy.
Rana Kapoor’s reported misuse of power to extend unsecured loans for personal benefits brought about glaring defects in corporate governance, conflict of interest procedures, and loan risk processes. The legal proceedings filed under the Prevention of Money Laundering Act (PMLA) and provisions of the Indian Penal Code (IPC) highlight the increasing role of the judiciary in addressing white collar crime and rebuilding public confidence in the financial system.
Although the Reserve Bank of India’s intervention stabilized the crisis, the episode itself is a symptom of a greater institutional need for change. In the future it is very important to put in place more robust internal control mechanisms within private banks to ensure strict compliance with due diligence norms, and foster a culture of ethical leadership.
The Yes Bank scam is not merely just an episode of financial deceit, it is a legal and institutional wake-up call that reinforces the value of transparency, accountability and watchful regulation in Indian banking.
FAQS
Q1. What is the Yes Bank scam?
It was a banking fraud where Yes Bank gave risky loans to failing companies. In return, Rana Kapoor, the bank’s ex-CEO, received personal benefits.
Q2. Who was arrested in the case?
Rana Kapoor was arrested by the Enforcement Directorate for money laundering and cheating.
Q3. What did the RBI do?
The RBI took control of the bank, limited withdrawals, and launched a rescue plan with help from other major banks.
Q4. What laws were used in the case?
The case involved the PMLA, Indian Penal Code (Sections 420 and 120B), and the Banking Regulation Act.
Q5. Why is this scam important?
It shows the need for better rules, ethical leadership, and strict checks in private banks to protect the public’s money.
