YES Bank removes fraud tag on Avantha Holdings after forensic audit

Yes Bank has removed the fraud tag on the account of Avantha Holdings, a family investment company of Delhi-based businessman Gautam Thapar, after it carried out a forensic audit of the company, according to people aware of the matter.

The bank had red-flagged the account to the Reserve Bank of India (RBI) after the Thapar group company defaulted on a loan that it had obtained from the bank when Rana Kapoor was helming its affairs.

Lenders typically 'red-flag' an account when they believe the borrower has defaulted on a loan due to some suspicious activity such as misuse of the funds.

Yes Bank had provided an unsecured loan of Rs 500 crore to Avantha Holdings. To secure its exposure, it provided additional loans to the company between 2017 and 2019 and took shares of CG Power as collateral to secure the entire loan amount.

Yes Bank and Avantha Holdings had not responded to ET’s queries as of press time.

State Bank of India had invested Rs 7,250 crore in Yes Bank in March 2020 as part of a government-backed rescue plan. It is the largest shareholder of the bank now after Kapoor was eased out and investigations were launched against him.

Avantha Holdings is also the company that was at the centre of loans from KKR India Financial Services. The company had taken five loans from KKR’s debt arm. Four of those were fully paid off. However, one of the loans, which was secured against Thapar's shares in CG Power, turned bad. The US private equity firm invoked the shares that it had held as security. It also allegedly orchestrated Thapar's removal from the board of CG Power. Thapar has contested his removal at the National Company Law Tribunal.

Avantha Holdings is the vehicle that Thapar used for financing the group’s expansion into thermal power generation. Most of the loans raised by the holding company were intended for utilisation towards capex requirements of the power plants.