Market regulator Sebi is investigating investments between Nippon India Mutual Fund and YES Bank between 2016 and 2019 for suspected misuse of investors’ money, Reuters reported quoting sources.
As per the Reuters report, the market watchdog is probing whether investments by the fund, known at the time as Reliance Mutual Fund, in perpetual bonds of YES Bank were made as part of a deal whereby in return the lender invested in securities of Anil Ambani group companies.
Nippon India, a part of Nippon Life Insurance Co, bought 75 per cent stake in Reliance Asset Management Company in October 2019 to become the owner of the mutual fund house. Before that, it was known as Reliance Mutual Fund and was owned by the Anil Dhirubhai Ambani Group. On the other hand, YES Bank was taken over by the RRBI in 2020 and sold to a consortium of banks after a dramatic rise in non-performing assets.
Reuters report suggested that if Sebi’s probe results in charges against the fund, its officials or the bank, it could lead to penalties ranging from restrictions on accessing capital markets to monetary penalties.
The current owner of the fund, Nippon India, as well as the previous owner could be liable, the sources told Reuters.
The Reuters report citing one source suggested that Nippon India, its senior officials and also its former sponsor could face charges for violating regulatory norms under India’s ‘Prevention of Fraud and Unfair Trade Practices Relating to Securities Market’ rules.
YES Bank and its former officials could also face charges, the source told Reuters.
The transactions under scrutiny date back to before the transfer of ownership, the sources said. Nippon Life did not respond to telephone calls from Reuters seeking comment.
The Nippon India mutual fund was the biggest holder of additional tier-1 bonds issued by YES Bank between 2016 and 2019 and held Rs 25,000 crore out of the Rs 84,100 crore of such securities issued by Yes Bank, according to court documents, Reuters report suggested.
These bonds were cancelled in 2020 by YES Bank as part of its restructuring, which has been challenged in court by bondholders, Reuters reported.
As a consequence of this case, the market regulator plans to tighten its rules, said the first source, although any final decision will only come after the investigation is completed.