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Yes Bank Recovery: How Is It Performing?

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‘Any crisis cannot be handled until it is recognised and acknowledged as one.’

In 2019 December, the Reserve Bank of India came up with a report depicting gross non-performing assets of the banking sector at 9.1% in September 2019. The Indian banking system has been on shaking grounds for some time now, majorly due to huge NPAs. 

Amid this mayhem, failure of any bank leads to adding more issues to the problems. 

This is what happened when the Yes Bank failure surfaced! The year 2020 started with the fourth-largest private bank in India with an employee count of more than 18,000 finding itself into a mess and nothing less than a sinking ship. For those who are unaware of the aura, Yes Bank had, read ahead. 

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It was a banking anchor for UPI transactions of more than 20 big companies and a bank that solely contributed around 35% of the UPI transactions that took place in the country. There were approximately 2 lakh crores worth deposits made in the bank before it saw its lowest point. Thus, if a bank with this capacity faces any crisis then it not only affects the depositors or the employees but the entire economy of the nation. 

The big daddy of banks (RBI) knew this very well and at last, it came to provide a life jacket so as to save Yes Bank from sinking. 

RBI proved to be a blessing in disguise for it. 

Back Story: Why Yes Bank Failed?  

The bank was founded by Rana Kapoor and Ashok Kapoor in 2004 but in 2008 Ashok Kapoor lost his life during the attacks of 26/11. 

So, technically after 2008, it was CEO Rana Kapoor who was looking after his dream project. Now, as pointed out in reports and articles about the Yes Bank crisis that after 2008 Rana Kapoor adopted a rather aggressive approach when it came to providing loans. He went on to approve loans to people and companies that represented a low possibility of repaying the money to the bank and these loans were sanctioned at high-interest rates. 

He was operating the bank with a very risky strategy that ultimately showed its adverse effects in future. An article featured in ThePrint shed light on this matter. It even made mention of a report published by UBS which pointed out that Yes Bank was able to book such high growth since 2015 because it started to give loans to the companies that were stressed. 

Thus, it all boiled to the same old story of ‘bad loans’ and ‘NPAs’ 

The Rescue Plan For Yes Bank  

When going gets tougher one needs a helping hand! 

The private lender was in trouble and RBI came to rescue it. In March 2020, owing to non-fulfilment of the regulatory compliances Reserve Bank of India had to intervene and called it some banks to buy stakes in Yes Bank. This way hope was ignited for the private lender yet again. 

This goes without saying that if the Yes Bank would have collapsed further, the depositors in the country would have lost all the trust in our financial system. The banking system in India is a massive source of funds and capital for corporates. Any kind of failure of such a huge financial institution would certainly have adverse after-effects. Thus, some way or the other it had to be rescued! 

As a result, State Bank of India and seven other Indian banks came forward and bought a combined stake of 79% in Yes Bank so as to stabilize the storm of crisis lingering around it. After the stake was taken by these banks, mainly SBI was given the responsibility of becoming its backbone and helping it stand up again. With that, it was conferred with the duty of supporting Yes Bank and ultimately saving the nation’s financial system as well. 

Under the Yes Bank rescue plan, the entire senior management that was working at Yes Bank was changed. The new management is supervised by State Bank of India itself. Mr Prashant Kumar was appointed as the new  MD & CEO of the Yes Bank who began his career with financial institutions as a Probationary Officer in SBI (in the year 1983). A well-experienced person now carries the responsibility of reviving the bank’s condition. 

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How Is Yes Bank’s Recovery Going On? 

The Yes Bank was put through the recovery treatment to let us see how it is performing at present. 

According to the data from October 2020, government bodies hold around 36% stake in the Yes Bank. The breakdown of the same is  - State Bank of India holds 30% stake,  LIC holds a 4.99% stake and SBI Life Insurance holds a 1.54% stake in it. Further, the public continues to hold 39.56% of the stake of the bank. Rest of the stake belongs to several other significant entities but the share is significantly small. 

Once the management of the bank was renewed, the fallen deposits of 1,05,364 crores (as of March 2020) has shown growth of about 28%. In June 2020, its quarter-on-quarter deposits posted a hike touching the mark of 1,17,360 crores and it again increased to 1,35,815 crores in September quarter. Although due to its conservative approach, there was relatively small growth in loans sanctioned to the customers, on a quarterly basis. The Yes Bank share price is also recovering after dipping significantly low during March this year. 

The bank is keen on solving its NPA issue so as to further stabilize itself. The NPA is still a lot but one positive point that it can hold on to is that the bank’s Gross NPA and Net NPA has decreased a little as compared to last fiscal. 

Well, growth is important even if it is small!  All in all, the plan of restructuring Yes Bank is showing good results, turning the handles of the bank towards profitability. 

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Shivani