On March 5, 2020, the Reserve Bank of India (RBI) imposed a 30-day moratorium on YES Bank, superseded the private-sector lender’s board, and appointed Prashant Kumar, who was serving as chief financial officer and deputy managing director at State Bank of India (SBI), as an administrator. The deposit withdrawals were capped at Rs 50,000 per person. The central bank proposed a reconstruction scheme under which SBI might take a maximum of 49% stake in the restructured capital of the bank. Analysts believed the new management of YES Bank, headed by former Deutsche Bank India head Ravneet Gill, who joined the bank in early 2019, could turn around the ship. Gill, however, has struggled to do so.

Yes bank was enjoying a good position in the market under the supervision of Rana Kapoor (former MD and CEO of Yes Bank).

Rana Kapoor started Yes bank at a time when there was no major competitor in the banking sector other than Uday Kotak. Uday Kotak was the only one leading the charge on private banking. Rana Kapoor aimed at providing a model to his bank like that of Uday Kotak.

Initially, the funds amounting to Rs. 200 crores were infused by Rana Kapoor and his brother-in-law Ashok Kapoor. A year later, the bank raised Rs. 300 crores through an initial public offering (IPO).

Yes bank’s stock became a hot seller in 2005. Its stock was priced at around Rs. 12.5 during 2005. This price went up to Rs. 393 in August 2019. Rana Kapoor was in limelight due to the fast rise of his bank.

Over the span of a decade the bank recorded a 30% rise in its profits thus signaling green flags for the bank. ICICI securities also recommended buying Yes bank share after it showed strong business growth in 2017. In January 2019, Rana Kapoor entered billionaire after his net worth surged. His 11.6% stake in the bank was now worth $1 billion, according to Bloomberg.

Rana Kapoor was looking to double Yes bank’s market share from 1% to 2.5% in 2020. But as time went, past series of the event unfolded and this dream of his started to fade. In order to achieve such market share, Yes Bank went on a loaning spree, advancing money to each and everyone in need. It was so said that even if from nowhere, one could get a loan from Yes Bank. Such was the image of Yes Bank. Anyone could get a loan without proper documentation, thus paving way for the downfall of the bank.

Nearly Rs. 10,000 crores worth loans (about 4% of all its loans) given under Rana Kapoor’s management were classified as high risk (High-risk loans were the ones that were suspected to turn bad within a year). Yes, the bank had exposure to almost all the troubled companies in the country like Jet Airways, Anil Dhirubhai Ambani Group, Cox & Kings, Dewan Housing Finance (DHFL), Essar Shipping, Cage Coffee Day etc. While bad loans piled up, they did not make enough provisions to cover up such loans. As such the bank was able to recover some of its debts like that from the kingfisher but eventually the model was heading towards failure.

In 2016 the RBI discovered that Yes Bank was sweeping a lot under the carpet. Non-performing assets worth Rs. 4176 crores for March 2016 were underreported by the Bank. In 2017, the extent of underreporting amounted to Rs. 6355 crores. Such underreporting by the bank costed them $1 billion as their plan to raise the lost amount through qualified financial institutions failed thereby leading to its downfall.

Ravneet Gill was appointed as the successor of Rana Kapoor in March 2019 as Rana Kapoor was taken in judicial custody by the Enforcement Director (ED) in March 2019. But this was not the end of the road for Yes Bank. Revenue fell by 20%, costs rose through the roof shrinking operation profit by 40%. Yes bank’s share slipped by 93% since its peak of August 2018. Loan spree and a high number of NPA’s led to the downfall of the bank.

As of now, SBI has approved an investment of Rs. 7250 crores in the troubled Yes Bank as a part of the revival scheme. Even after such investment, there are various directions in which the future of Yes bank may lead.

One which I think of that is such investment from SBI will not prove to be of any help and the bank will continue to deteriorate and ultimately it will lead to a merger with SBI as liquidation is not at all viable for such a bank.

Liquidation of Yes Bank will impact the entire banking system and the economic system as a whole. So, you really cannot afford to let a bank go down, which is why in the case of banks we have the philosophy of ‘too big to fail’. Yes Bank as the fourth largest private sector lender cannot be allowed to go down. So, there will be no question of it being liquidated or allowed to go over the cliff.

The other is that Yes bank will be back on its feet and become a successful bank again.

Not yet known it is still to be seen that where the future of Yes Bank is headed.

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