On March 16, local time, YES Bank, India ’s fourth largest private bank, officially announced that they will officially resume operations at 6 pm local time on March 18, India time. From March 19, all of the bank’s services will be open to users again.
The company announced this through its official Twitter:
“Our bank will resume all banking services on Wednesday, March 18, 2020 at 18:00. As of March 19, 2020, you can visit our 1,132 branches across the country and experience our company Services provided. In addition, you have access to all digital service platforms of YES Bank. “
On March 5th, the Reserve Bank of India (Reserve Bank of India, RBI) That is, the Bank of India announced that the YES bank has entered a frozen state. (Moratorium), The bank has previously issued a large number of loans to many companies, but failed to Recovered as scheduled. However, the reason for RBI’s decision to intervene was that the latter failed to raise the US $ 2 billion capital injection in time, which indicates that its self-rescue operation has failed.
On the same day, the RBI also decided that without its approval, the maximum withdrawal amount for each depositor must not exceed 50,000 rupees, except for medical and education and weddings for me and my family. Necessary expenses and other urgent matters.
In recent years, there has been very little precedent in the Indian financial community for central banks replacing commercial bank managers with direct management of the latter. So this time RBI’s takeover of the YES bank is extremely rare. Ironically, the YES bank was established almost exclusively by top professionals in the industry. The Bank of India’s latest issue of banking licenses to professionals was Global Trust Bank; unfortunately, the latter was eventually forced to choose to merge with Oriental Commercial Bank due to poor governance.
Why is the central bank involved?
As for the YES bank “thunderstorm” incident, the reason why the RBI took such a radical action is to follow the local Indian media Business Today Today for at least six reasons.
Deteriorating financial conditions
The financial status of YES banks has been declining for the past few years. The reason is that the bank has not been able to raise enough funds to cope with potential loan losses and the resulting rating downgrade; the latter two have directly brought two results: first, investors have increased the use of bond contracts; Second, a large number of depositors began to withdraw deposits. For the past four quarters, YES banks have been losing money, and they are simply unable to make a profit.
According to the company’s data for the third quarter of fiscal year 2019-2020, the YES bank’s loss reached Rs. 185.64 crore in December last year; while the Q3 data for fiscal year 2018-2019 was Rs. 10.01 crore; no earlier For the previous fiscal year 2018, its Q3 data was a loss of Rs 6 crore. Therefore, the loss for this year is also the highest in history.
Severe management issues
Long-term serious management problems are also an important reason for the decline of YES bank year by year. There is a lot of evidence in this regard. For the financial year 2018-19, the company’s concealed bad debt has reached Rs 32.77 crore; and the latest financial report data also shows that YES bank’s non-performing loan ratio has reached 18.57%, which is already The company with the highest bad debt ratio in private banks.
These shocking numbers directly led RBI to quickly oust former vice president R Grandhi from the board after taking over YES Bank.
False guarantee
The Reserve Bank of India recently revealed that for quite some time before the YES bank broke, they have maintained communication with their management to help the bank improve its balance sheet and increase its capital liquidity. It is reported that in the communication, the management has stated that they are negotiating with multiple investors and “the financing agreement will be reached soon.” But the reality is that until the company was taken over by the central bank, they did not reach any specific financing agreement, which directly caused the company’s capital chain to break and was on the verge of bankruptcy.
Investors wait and see
According to documents submitted to the stock exchange in February this year, the bank has approached several private equity groups to seek funding opportunities.
“These investors have had several meetings with Reserve Bank executives, but for various reasons, no company is willing to inject capital into the YES bank.” An RBI official said.
So it’s clear that these investors are not serious investors. They were worried that under the poor management of YES bank, their money could not be exchanged for the shares they deserved. But in fact, this worry is unnecessary, because the expansion of capital will inevitably make new investors acquire a large number of shares when the injection of capital must be approved by the Indian central bank.
No recovery plan
RBI officials said that given that bank and market-led recovery plans are preferable to central bank intervention, they have made every effort to urge YES banks to find a way to help themselves; the central bank has even provided management with sufficient time and opportunities to Develop a solid and credible recovery plan. But in the end, the plan remained at the level of “urging” and “suggesting.”
Severe liquidity outflow
YES Banks have long faced the dilemma of liquidity outflows. In other words, the bank’s savers have been withdrawing cash, and the actual withdrawal amount is greater than the deposit amount. The deposit amount is regarded as the lifeblood of the bank, but as of the end of September 2019, the bank’s deposit amount was only Rs 2.09 trillion.
But this is just the beginning. After only three months, the deposit amount has become 1.65 trillion rupees; by March 5 this year, this figure has dropped to 1.37 trillion rupees. The reason for the sharp decline in deposits is that worried customers are running to the bank run.
Executive arrested for money laundering
The company is on the verge of bankruptcy, and the CEO is naturally the target of criticism.
On March 8, Rana Kapoor, founder, former managing director and CEO of YES Bank, (Rana Kapoor) Suspected of violating the Indian Anti-Money Laundering Act and was arrested by the Indian Law Enforcement Agency of the Indian Federal Financial Crime Agency.
![]()
YES Former Bank CEO Rana Kapoor
The Law Enforcement Agency stated that during the tenure of YES Bank, Kapoor made loans worth Rs 200 crore to multiple entities. The agency claims that they found Rs 43 crore in rebates flowing into more than 30 shell companies. These companies are run by former Rana Kapoor’s wife, Bindu Kapoor, and her three daughters, Radha, Rahee, and Roshini.
At first, law enforcement authorities required Kapoor, 62, to be detained until March 11, but that date was soon extended to March 16. It is reported that the length of the detention was due to Kapoor’s unwillingness to cooperate with law enforcement agencies’ investigation of YES Bank.
On March 16, the special court decided to extend his detention until March 20, as investigating agencies demanded an in-depth investigation.
Fire at the gate of the city, hitting pond fish
In areas where the Internet economy is booming, once a bank goes into crisis, in addition to causing a run on runs, there are a series of troubles waiting for people to face.
From the media “Yang Fan goes to sea” After YES Bank suspended its operations, PhonePe, India ’s mobile payment program, was greatly affected:
As a third-party payment company, PhonePe needs a banking partner to enter UPI. UPI refers to a unified payment interface system. This system has an automatic payment function that enables users to designate merchants to perform automatic debit at a specific time. PhonePe’s payment QR code is also issued by YES bank. Startups like Indian e-commerce platforms Flipkart and Myntra, Indian online travel platforms MakeMyTrip and redBus often use Yes Bank to receive UPI payments. Therefore, it is conceivable that if YES bank fails, PhonePe’s business will be greatly affected.
In addition, as a “full-service commercial bank” in India, the YES bank established in 2004 has a wide range of business, and its cooperation with mutual gold companies is particularly deep. As a result, news that the company was taken over by the central bank also affected Chinese companies expanding their markets in India.
According to ShanghaiSecurities News statistics, the affected payment platforms Razorpay, Cashfree, etc. with Chinese investment; the affected systems are Yinniu Technology, Xinghe Technology, Shanyun Jinke, Yafei Digital, etc .; the affected A Parties include Cash Bus, LoanTime, Money Click, More Rupee, Cold Cash, and more.
Plan to work, return with full blood?
After taking over the YES bank, the RBI and the Indian government announced on March 6 the reorganization plan for the YES bank: National Bank of India (referred to as SBI) will receive a 49% stake in YES Bank through capital injection, and the latter’s withdrawal limit will also be cancelled soon.
In the following week, several banks announced a capital injection into the YES bank. Industrial Credit Investment Bank of India (ICICI Bank) and HDFC Bank, India’s largest lender, each injected 10 billion rupees into YES Bank; Essex Bank (Axix Bank) Capital injection of 6 billion rupees; India’s Kotak Bank (Kotak Mahindra Bank) injection of 5 billion rupees; Bandhan Bank and Commonwealth Bank (Federal Bank) respectively injected 3 billion rupees; IDFC first The bank has also injected Rs 2.5 crore. It is reported that, taking into account the capital injection of all the financial institutions involved in the bailout, India has invested Rs. 36 crore this time to rescue the YES bank.
Fortunately, the rescue plan quickly paid off.
On Monday, Moody’s Ratings upgraded YES Bank ’s long-term foreign currency issuer rating and foreign currency senior unsecured medium-term note plan rating to Caa1 from Caa3, and confirmed that its long-term foreign currency and local currency bank deposit ratings are Caa1. “Positive”. At the same time, the bank’s benchmark credit rating was also determined to be “ca”. Moody’s says major rating upgradesIt takes into account the rescue plan for the bank by the Indian government and a series of financial institutions.
I found that the situation has improved, and the head of the Reserve Bank of India’s (RBI) Shaktikanta Das publicly stated on the evening of March 16 that YES’s money is safe of. He also advised YES bank depositors, “Don’t run to the bank because of unnecessary panic.”
On March 19, that is, tomorrow, YES Bank’s users can use all the services of the bank. It seems that the crisis has been smoothly resolved, and the large and small enterprises affected by it can breathe a sigh of relief. I just do n’t know, the question is YES Can banks learn from this crisis and not repeat the same mistakes?