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| The yes bank crisis |
Queues of people in and outside of the Bank might remind you of something that happened more than three years ago(Demonetisation), or of something very similar that happened in September last year the Punjab and Maharashtra Cooperative (PMC) Bank crisis. The Yes Bank is yet another debt ridden bank that is under the crisis. From being the busiest bank once, India's fourth-largest private lender, the Yes bank is definitely the most troubled bank now.
The Reserve Bank of India on march 5, announced that it was superseding the Yes Bank board of Directors for a period of thirty days "owing to serious deterioration in the financial position of bank". On the contrary, what panicked the account holders of Yes bank was the decision of RBI to limit withdrawals at fifty thousand per month till april 3. With bad loans of more than twenty thousand crores sanctioned by the co-founder of Yes bank Rana Kapoor who is under the custody of the ED(enforcement directorate), the Yes bank is under moratorium.
Yes Bank overview:-
Yes bank is an Indian public bank with headquarter in Mumbai. Yes bank was founded by Rana Kapoor and Ashok Kapoor(Ashok Kapoor died in 2008 in Mumbai 26/11 attacks) in 2004, offering wide range of banking and financial products for corporate and retail customers through retail banking and asset management services. It has three subsidiaries Yes bank, Yes capital, and Yes asset management services. Yes bank also provides Unified Payments Interface(UPI) services for some major companies such as airtel, cleartrip, redbus and PhonePe.
You might remember the funny twitter banter between paytm payment bank and PhonePe where paytm invited PhonePe to use their own UPI platform , as PhonePe uses Yes bank's UPI services, and PhonePe giving a befitting reply by stating that if it was 'seamlessly scalable', PhonePe would have approached the platform itself. Almost 35% of total UPI transactions of the country were done through Yes bank.
why the Yes bank crisis happened:-
why the Yes bank crisis happened:-
The inability of the Yes bank to raise capital to address potential loan loss caused steady decline, Provoking invocation of bond contracts by investors, and deposit withdrawals. The bank also had some serious governance issues in recent years. The bank went on a loaning splurge with advances rising by 334% between the financial year 2014 and 2019. Many borrowers started defaulting, Defaulters of Yes banks includes DHFL group(Rs 4,735 crore), Reliance Anil Dhirubhai Ambani group(Rs 12,800 crore), Essel group(Rs 8,400 crore), IL&FS(Rs 2500 crore) B M Khaitan group(Rs 1,250 crore) etc.
Rana Kapoor:-
Rana Kapoor:-
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| Rana Kapoor |
Rana Kapoor the co-founder of the Yes bank, former CEO and managing director of Yes bank is being considered as the main culprit behind the downfall of the bank along with the defaulters. Rana Kapoor has worked for Bank of America for sixteen years from 1980 to 1996. in 2005, he was awarded Ernst&young's start-up entrepreneur of the year. in 2017, with the rising share price of Yes bank, Kapoor had become billionaire as noted by the Bloomberg(a privately held financial, software, data and media company). with a drop in Yes bank share price since august 2018 Kapoor net worth also has fallen. On 8 march 2020, a case was registered against him by E.D. under prevention of money laundering act(PMLA) and he was arrested. Kapoor along with his family members is also charged by CBI in a bribery and money laundering case linked to the bank, which he denies.
The Yes bank rescue plan and SBI:-
The yes bank may get a lifeline as government approves SBI's rescue plan.The SBI may hold 45.74% under the new proposed structure, while HDFC and ICICI bank may hold 6.31% each. According to the new scheme, Prashant Kumar(former CFO of SBI) will be the new head of the Yes bank. SBI approved an investment of 7,250 crore to rescue the Yes bank.
The Modi government has a major imminent problem other than CAA controversy and novel Coronavirus and that is the weak economy of the country. The banking and financial system has undergone a lot of troubles in the last decade or so due to bad loans and bad management. The question also arises that did the govt. and RBI acted well in time particularly in the case of Yes bank. The Modi government should thanks the weak opposition and slanted and fawning mainstream media houses of the country that they haven't been questioned strongly, otherwise, these things would have easily caused political nightmares.
conclusion:-
Meanwhile, The Finance Minister of our country, Nirmala Sitharaman, the lady "Kabir Singh" of Indian politics(looks angry most of the time) has assured the account holders of Yes bank that their money is safe in a statement given to press. In Spite of such assurances and bank deposit insurance hiked to Rs 5 lakh per depositor by budget 2020, such bank collapse makes us think whether our money is safe in banks or not?