The Economic Offences Wing (EOW) of Mumbai Police is gearing up to probe serious allegations of "closed-loop funding" and collusive loan assignments between YES Bank and Suraksha Asset Reconstruction Private Limited (ARC), stemming from a complaint by Rakesh Wadhawan, a former promoter and suspended director of Housing Development and Infrastructure Limited (HDIL). Filed recently, the complaint demands a criminal probe into loan sanctions, restructurings, and assignments from FY 2017 to FY 2019. It accuses the parties of opaque transactions lacking transparent price discovery or independent valuations, with Suraksha ARC's 15% margin money allegedly funded by group entities that YES Bank financed, simultaneously creating a "closed-loop funding and round-tripping" scheme where no genuine third-party capital was infused.
Wadhawan's representation cites YES Bank's own special audit, which reportedly flagged missing auctions, competitive bidding, and valuation reports for stressed asset sales. It also claims Special Mention Account (SMA-2) loans were offloaded to the ARC without recovery efforts, suggesting balance-sheet manipulation and evergreen loans. A spotlighted case involves a ₹150-crore term loan to Sapphire Land Development Private Limited (SLDPL). Though the credit memo showed ₹100 crore sanctioned, ₹150 crore was disbursed, then assigned to Suraksha ARC for ₹150 crore (against dues of ₹154.53 crore) within 10 months still in moratorium and not yet an NPA. Critics call this a "colourable device" due to absent valuations, market pricing, and timely board approvals. Notably, YES Bank retained ₹127.50 crore in security receipts, questioning the "true sale." The complaint alleges breaches of SARFAESI rules and RBI guidelines on NBFC financing and securitisation, claiming these moves let Suraksha ARC inflate claims and gain undue voting power in HDIL's insolvency proceedings.
The complainant urges EOW to register cases for criminal conspiracy, cheating, breach of trust, record falsification, and fund diversion, while summoning audits, transaction trails, and approvals. Sources indicate EOW will launch an inquiry, potentially filing an FIR if allegations hold. Queries to YES Bank and Suraksha ARC went unanswered.
“Closed-loop funding” refers to a financial arrangement where money used in a transaction effectively originates from, or is financed by, the same party involved in the deal, creating a circular flow of funds rather than bringing in genuine third-party capital. In the context of the complaint, it is alleged that Suraksha ARC’s required 15% margin money was funded by group entities that were simultaneously financed by YES Bank. This allegedly resulted in a round-tripping structure where loans were sanctioned, assigned, and funded within a connected ecosystem, without independent price discovery, fresh capital infusion, or arm’s-length transactions, raising concerns about transparency, true risk transfer, and balance-sheet integrity.
Nilesh Shukla is a Mumbai based journalist working with Times Now. With passion for uncovering truth and sharing stories that need to be told, Nilesh...View More
Source: India Latest News, Breaking News Today, Top News Headlines | Times Now
