Yes Bank Crisis: 5 Key Reasons to Know
The Yes bank; another debt-ridden Private Sector Bank of India is under the crisis. Currently, the Indian banking system is passing through a very tough time.
As on September 30, 2019; the Non-Performing Assets (NPAs) of Public Sector Banks (PSBs) stood at ₹7.27 lakh crore. The private sector banks are also have huge NPA.
The Yes Bank has more corporate customers than retail in its list of customers. Most of the companies Yes Bank has given loans are in loss. These companies are on the verge of bankruptcy, that is the reason that the bad loan of the yes bank has increased.
Now read this article to know the full detail of the yes bank crisis.
Facts About the Yes Bank
Establishment: 2004; 16 years ago
Founder: Rana Kapoor, Ashok Kapur
Chairman: Brahm Dutt
MD & CEO: Ravneet Gill
The number of Branches and ATMs: 1,122 branches and 1,220 ATMs (June 2019)
Type: Private Bank
Revenue: ₹25,491 crore (2018)
Total assets: ₹301,390 crore (2018)
Net income: ₹-1,506.64 crore (2019)
Products: Consumer banking, Credit cards, Corporate Banking, Finance and Insurance, Mortgage loans, Private banking, Wealth Management, Investment banking.
Now let us discuss the reasons of Yes Bank crisis
1. Deteriorating Financial Position
The declining financial position of the bank can be easily understood by the declining share price. The share price of the yes bank was 400 rupees in 2018 which is now standing at just 16.60 as of 6 March 2020.
The financial condition Deteriorated due to its inability to raise capital to address potential loan losses. The bank was experiencing losses and inadequate profits in the last four quarters.
2. Corporate Customers:
The Yes Bank has more corporate customers than retail in its list of customers. Most of the companies Yes Bank has given loans are in loss. That is the reason that yes bank did not receive its loan back on time. The bad economic condition of the companies deteriorated the financial condition of the yes bank also.
One of the founders of the yes bank Mr. Ashok Kapur had died in the 26/11 Mumbai attack. So the wife of late Ashok Kapur wants her daughter to be included in the Board of Directors that is opposed by the wife of Rana Kapur.
So the bank had serious governance issues. That is the reason former Deputy Governor of RBI Mr.R Gandhi was included in the BOD of the yes bank. Ultimately the bank reported NPA of Rs 3,277 crore in 2018-19.
4.Outflow of Liquidity
Money deposited by the customers is the backbone of the banking industry. If rumour arises that a particular bank may be in problem in the future; suddenly all the customers start withdrawing money. This practice put the bank into the dock and the bank's deposit started deteriorating followed by a decline in profit.
The Yes bank had the deposit book of Rs 2.09 lakh crore at the end of September 2019.
5. Huge Liabilities:
The Yes Bank has a total liability of 24 thousand crore dollars. The bank has a balance sheet of about $40 billion (2.85 lakh crore rupees). The Yes Bank has to pay $ 2 billion to increase the capital base.
So these were some reasons behind the pitiable condition of the yes bank. Finance Minister Nirmala Sitharamn had said that the money of every customer will be safe. It can be expected that within 30 days the government will decide whether the yes bank will be merged or takeover?