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Yes bank crisis: What actually happened?

New Delhi: Once a favorite, Yes Bank is now on the verge of drowning. A bank that was known to pay above average interest. Its very bad days are going on. The situation is so bad that efforts have been made to save it for months. Bank shares are continuously falling, in today’s session it is trading below 50%. SBI has now come forward to save it. But the question is how this shining star in the world of banks reached the trough? The story begins with the feudal atmosphere and infighting of Rana Kapoor’s family. Let us first understand when and how this bank started.

When did this bank established?

Yes bank is not very old. In 2004, Rana Kapoor started this bank with his relative Ashok Kapoor. Ashok Kapoor died in the 26/11 Mumbai attack, followed by a fight between Ashok Kapoor’s wife Madhu Kapoor and Rana Kapoor over the ownership of the bank. Madhu wanted a place on the board for her daughter. Just after 4 years of establishment, the family feud started dominating the bank and today it has come here.

How many branches of Yes Bank in India?

Yes Bank, the country’s fourth largest private bank, has a presence all over the country. Its headquarter is in Mumbai. The bank’s network is quite large. It has more than 1000 branches and 1800 ATMs across the country. Yes Bank also has a women’s special branch, which is run by the name of ‘Yes Grace Branch‘. These have special product offers for women. Their special thing is that they have fully staffed women. In addition, there are more than 30 ‘Yes SME branches’ in the country, which provide specialized services to SMEs.

What does the finance ministry’s circular say?

The Finance Ministry barred bank’s depositors from evening 6 pm on Thursday 5th March to 3rd April. Several restrictions were imposed on the business of this bank including the limit of withdrawal. During this entire period, the account holders will not be able to withdraw more than Rs 50,000. If an account holder has more than one account in this bank, even then he can withdraw only 50 thousand rupees in total. This notification was issued on the order of the Reserve Bank. The notification also states that if an account holder has taken a loan from the bank or has a liability on the bank, then the money will be given from the deposit only after deducting that amount.

What did the Reserve Bank say?

The RBI on Thursday dissolved the board of directors of Yes Bank and appointed the administrator. The central bank has fixed the withdrawal limit for the bank’s customers to Rs 50,000 till further orders.

How Yes Bank received jolts one after another?

Rana Kapoor withdraws from the post: Yes Bank’s crisis began to worsen when the bank’s co-founder Rana Kapoor was removed from the post. The Reserve Bank said that he was not giving the correct information of the balance sheet. On 31 January, he was asked to step down.

Fines on Yes Bank: RBI imposed a fine of Rs 1 crore on the bank. It was alleged that the bank messaging software SWIFT was not following the rules. This software is used for bank transactions.

Rating decreased: After this the bank could not reach the goal of raising funds through QIBs. In August 2019, Moody’s downgraded Yes Bank ratings and most rating agencies were not convinced about it. The bank’s profit worsened as its rating plummeted, with negative signals reaching the market.

Market Cap collapsed: Where in September 2018 the market cap of Yes Bank was around 80 thousand crores, it has decreased by more than 90%. The bank’s share price in August 2018 was around Rs 400, which is currently around Rs 18 due to lack of cash. Today, the bank’s shares are trading below 50%.

What are the reasons for Yes Bank’s crisis?

Family reasons: When Ashok Kapoor died in 2008, there was a rift in the Kapoor family. Ashok’s wife Madhu wanted to include her daughter Shagun in the bank’s board, the case reached a Mumbai court, in which the victory was won by Rana Kapoor. The war came to an end for a short time and Ranveer Gill was appointed MD of the bank. During this period, cases of corporate governance came to light and the bank was hit by debt. Gradually the times changed and the promoters started selling their stake.

Rana Kapoor sells his shares: Rana Kapoor used to describe his shares in the bank as diamond and pearl and never wanted to sell it. But in October 2019, conditions reached such a point that Rana Kapoor and his group’s stake came down to 4.72. On 3 October, senior group president Rajat Monga resigned, he sold his stake in September.

Blow from Corporate customers: 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. Companies are on the verge of insolvency, so there is little scope for getting back the loan. When companies started sinking, the bank’s condition also began to thin.

What will RBI do next?

In the midst of all restrictions, RBI will now assess the asset quality of Yes Bank accounts and then decide what can be done next. It is expected that within 30 days it will be decided whether the merger or takeover of the country’s fourth largest private bank will be done.

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