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YES Bank Crisis - The NPA Trap


Last thursday night, when the news came up that The Reserve Bank Of India (RBI) had placed Yes Bank under moratorium, left the depositors and investors of Yes Bank in uneasy conditions. This ' Moratorium ' means that a customer or account holder can now withdraw a maximum of Rupees 50,000 in this period of his or her savings or current or any other deposit accounts with Yes Bank. If you have more than one account with Yes Bank then the moratorium will apply cumulatively on all yours accounts. 


Yes Bank is India's fifth largest private bank which will now be helped by The State Bank of India (SBI) to revive. The bank is facing these bad days due to surging bad loans and improper management. RBI declined to extend the term of founder Rana Kapoor as Chief Executive in 2018, is being used as a little excuse by the bank also. In order to fit themselves into the required regulatory requirements, in order to operate in the economy, which are CRR, SLR, other ratios and percentages, the bank needs a good capital infusion and high profits. To get more interest payments on their lendings the bank started funding the failed sectors of the economy and provided loans to the companies with bad credit scores. The bank has been trying to raise $2 Billion in fresh capital since last year, also delaying it's December-quarter results and reports. 


The Non Performing Assets (NPA) count of Yes Bank is at 35,000 crore rupees. Most of these loans were given around 2008, when India's GDP was struggling due to Global Financial Crisis. Yes Bank's total laon exposure is Rs. 3.79 lakh crore, which include both non-fund based loans and fund based loans. According to financial analysts and area experts, the best possible way to revive is capital infusion and better management of NPAs. SBI will now buy 49% stake in the bank, and likely to change the Managing Director and the CEO of the bank Ravneet Gill. Yes Bank needs around 12,000 crore rupees to meet the regulatory requirements. Coming to the stock exchange reactions to this news, Yes Bank's share closed at Rs 16.15 on Friday, which is almost 0.15 times it's book value. Stock market analysts have also commented that performance of Yes Bank in stock market had continuously indicated that there are some issues in the management of the bank. 


The problem is that the economy is currently in  slowdown, which creates more difficulties for the management of bank to survive. But the question that started from The PMC Bank Crisis that " Is our money SAFE? ", is still not answered. Finance Minister Nirmala Sitharaman has assured us that she would not let any bank sunk. RBI and Finance Ministry, maybe collectively, come up with some measures and quick actions, to help the financial and banking sector. 

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