Mumbai, Feb 16: The Economic Offences Wing (EOW) of the Mumbai Police has registered a preliminary enquiry to examine allegations of “closed-loop funding” and collusive loan assignments involving YES Bank and Suraksha Asset Reconstruction Private Limited, DCP Nimit Goyal confirmed to FPJ.
The action follows a detailed complaint filed by Rakesh Kumar Wadhawan, suspended director and former promoter of Housing Development and Infrastructure Limited (HDIL). The complaint seeks a criminal investigation into a series of loan sanctions, restructurings and subsequent assignments undertaken between FY17 and FY19.
Allegations of closed-loop funding and round-tripping
At the heart of the complaint is the allegation that the 15% margin money paid by Suraksha ARC to acquire stressed assets was funded through group entities that were simultaneously financed by YES Bank.
The representation describes this as a “closed-loop funding and round-tripping arrangement,” claiming that the ARC did not deploy genuine third-party capital and that the funds effectively originated from the lender itself.
It further alleges that transactions lacked transparent price discovery and independent valuation. According to the complaint, a Special Audit commissioned by YES Bank reportedly flagged the absence of auction or competitive bidding prior to the sale of stressed assets, along with missing valuation reports.
It also claims that even SMA-2 classified accounts were sold to the ARC without mandated recovery efforts, raising concerns of balance-sheet window dressing and evergreening of stressed exposures.
Questions over ₹150-crore loan transaction
One of the transactions cited involves a ₹150-crore term loan extended to Sapphire Land Development Private Limited (SLDPL). The complaint alleges that while the credit appraisal memorandum recorded a sanction of ₹100 crore, ₹150 crore was ultimately disbursed.
The loan was allegedly assigned within ten months—during the moratorium period—despite not being classified as a non-performing asset. The assignment of dues amounting to ₹154.53 crore for ₹150 crore has been described in the complaint as a “colourable device,” citing lack of independent valuation, absence of market-based price discovery and post-facto board approvals.
It is further contended that YES Bank retained substantial economic interest in the assets through security receipts aggregating to ₹127.50 crore, thereby undermining the “true sale” nature of the transaction.
Alleged regulatory violations and insolvency impact
The complaint also alleges violations of the SARFAESI framework and RBI master circulars governing bank finance to NBFCs and securitisation of assets. It argues that such assignments enabled Suraksha ARC to assert inflated claims and secure disproportionate voting rights in insolvency proceedings linked to HDIL, potentially distorting the corporate insolvency resolution process.
The EOW has been urged to take cognisance of alleged offences including criminal conspiracy, cheating, criminal breach of trust, falsification of records and diversion of funds. It has also been requested to seek production of audit reports, transaction trails and internal approvals for scrutiny.
A senior officer said that the EOW will examine the material placed on record and initiate a formal FIR if cognisable offences are established during the preliminary enquiry. Queries sent to YES Bank and Suraksha ARC seeking their responses to the allegations remained unanswered at the time of publication.
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If pursued further, the case could revive debate around governance standards in asset reconstruction transactions and regulatory oversight in India’s stressed asset resolution framework. Market participants are expected to closely track the outcome of the EOW’s probe.
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