Watch | Yes Bank crisis explained

The Reserve Bank of India has placed Yes Bank under moratorium. Yes Bank customers cannot make regular withdrawals of more than Rs. 50,000 a day till April 3, subject to a maximum of Rs.5 lakh.


How did Yes Bank fall into the crisis?

1. It went on a loaning spree with advances rising by 334% between Financial Year 2014 and 2019

2. Many borrowers started defaultingThe bank’s gross non-performing asset percentage, that is the percentage of loans overdue for more than 90 days, zoomed to 7.39% as of September 2019, the highest among comparable banks.

3. While bad loans piled up, the bank did not make enough provisions in its profits. Its provisions were the lowest among comparable banks

4. Customers withdrew large amounts, resulting in the credit-deposit ratio crossing 100% in 2018-19. That is, it lent more than it received.

5. Loan spree and high NPA meant poor profitability, gauged by Yes Bank’s sinking Return on Assets

6. The bank’s stock price fell steadily in the past year

 "The bank has also experienced serious governance issues and practices in the recent years which have led to steady decline of the bank, said Reserve Bank of India.

Also read | We expect moratorium to be lifted by weekend: Yes Bank administrator

The RBI has announced a draft ‘Scheme of Reconstruction.' This entails State Bank of India investing capital to acquire a 49% stake.

RBI superseded its board and appointed former SBI CFO Prashant Kumar as the new administrator


How will this impact customers?

1. Amount deducted towards loan and premium payments will be impacted if it is higher than Rs. 50,000.

2. It will have an impact on customers whose salary account is linked to Yes Bank

3. The possibility of renewing or granting loans and making investments by the bank will reduce.

Yes Bank founder Rana Kapoor was placed under arrest by the Enforcement Directorate on March 8. The CBI has issued a look out circular against Mr. Kapoor's wife Bindu and their three daughters

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Printable version | May 12, 2021 1:35:34 AM |

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