A special audit into YES Bank’s past dealings has uncovered serious governance and compliance concerns over the 2017 transfer of a large non-performing loan (NPA) linked to Housing Development and Infrastructure Ltd. (HDIL) to Suraksha Asset Reconstruction Company (ARC).
The ₹523 crore HDIL loan, including interest, was sold to Suraksha ARC on March 31, 2017, for ₹518 crore. YES Bank claimed it had secured a 15% cash margin, but auditors found signs that the bank may have indirectly financed the acquisition itself. Just weeks before the sale, YES Bank sanctioned around ₹199 crore in loans and credit lines to Fortune Integrated Assets Service Ltd., a company connected to the Suraksha group, and later increased the credit limit by ₹100 crore. A portion of these funds is believed to have flowed into Suraksha ARC’s account to help purchase the HDIL debt — a potential instance of fund round-tripping that undermined the intended risk transfer.
The report also flagged that the sale took place without competitive bidding or independent valuation, and that other stressed loans nearing default were disposed of in a similar opaque manner. Between 2016 and 2018, Suraksha ARC became YES Bank’s dominant distressed asset buyer, picking up over ₹2,700 crore in exposures, with 98% of ARC sales in FY17 going to Suraksha — raising questions of preferential treatment.
By the time Suraksha ARC lodged its claim in HDIL’s insolvency proceedings, the debt had grown to nearly ₹700 crore, but under the current resolution plan, it may recover only about ₹150 crore — a write-down of over 75%. The findings have drawn the attention of regulators and investigative agencies, adding to the scrutiny of YES Bank’s pre-2020 lending and restructuring practices and casting a shadow over governance standards in India’s asset recovery sector.
