The Securities & Exchange Board of India (Sebi) is probing potential violations of disclosure norms, including insider-trading rules, at Yes Bank after it faced allegations of selective revelations from a central bank review on the private-sector lender’s asset quality.
Sebi is examining whether Yes Bank breached any of the laws dealing with securities trading and these would include disclosure violations, two people aware of the development told ET. The regulator’s investigations relate to disclosures by Yes Bank on the matter of ‘nil divergence’ from central bank assessments on bad assets.
“Sebi has looked at disclosures and asked the company to explain the matter,” said a source.
Yes Bank did not respond to a query until the publication of this report.
On February 13, after trading ended for the day, Yes Bank said that RBI has not found any divergence in the asset classification and provisioning done by the lender during FY18.
Yes Bank shares surged 30 per cent after the news. RBI pulled up the bank for breaching confidentiality and violating regulatory guidelines. RBI had said that the Risk Assessment Report (RAR) was marked ‘confidential’ and it was expected that no part of the report be divulged except for the information in the form and manner of disclosure prescribed by regulations.
“Moreover, NIL divergence is not an achievement to be published and is only compliance with the extant Income Recognition and Asset Classification norms,” RBI had then said in a statement. “The issuance of the press release has, therefore, been viewed seriously by the RBI and could entail further regulatory action/s.”
There are three parts to the divergence report. The RAR also identifies several other lapses and regulatory breaches in various areas of the bank’s functioning and the disclosure of just one part of the RAR is viewed by RBI as a deliberate attempt to mislead the public, the central bank had said.
RBI assesses compliance by banks with the existing prudential norms on income recognition, asset classification and provisioning. The RBI conducted its first asset quality review (AQR) of banks in 2015 in order to find corporate loan accounts with severe financial weakness that were still classified as standard accounts on the books of the lenders.
In its assessment, RBI had earlier found that against the Rs 748.98-crore of gross NPAs reported as on March 31, 2016, the tally was at Rs 4,925.68 crore, leading to a divergence of Rs 4,176.70 crore.
This divergence further increased to Rs 6,335 crore in 2016-17 and was the main reason behind former CEO Rana Kapoor’s exit from the bank.
Source- Economic Times.