Yes The banking crisis explained – The Hindu
The Reserve Bank of India has placed Yes Bank under moratorium. Yes Bank customers cannot make regular withdrawals over Rs. 50,000 per day until April 3, subject to a maximum of Rs. 5 lakh.
How did Yes Bank fall into the crisis?
1. It has embarked on a wave of loans with advances up by 334% between fiscal 2014 and 2019
2. Many borrowers started to default The gross percentage of non-performing assets of the bank, that is, the percentage of loans past due for more than 90 days, reached 7.39% in September 2019 , the highest among comparable banks.
3. While bad debts have accumulated, the bank has not sufficiently provisioned its profits. Its provisions were the lowest among comparable banks
4. Customers withdrew large amounts, which pushed the credit-to-deposit ratio to 100% in 2018-19. That is to say, he lent more than he received.
5. A lending spree and high NPA meant low profitability, as measured by Yes Bank’s declining return on assets.
6. The bank’s share price has fallen steadily over the past year
âThe bank has also experienced serious governance issues and practices in recent years, which has resulted in the bank’s constant decline,â the Reserve Bank of India said.
Read also | We expect the moratorium to be lifted by the weekend: Yes Bank Administrator
The RBI has announced a proposed âReconstruction Schemeâ. This implies that the State Bank of India invests capital to acquire a 49% stake.
RBI replaced its board of directors and appointed the former SBI CFO Prashant Kumar as new director
What impact will this have on customers?
1. The amount deducted for loan payment and premiums will be affected if it is more than Rs. 50,000.
2. This will have an impact on clients whose salary account is linked to Yes Bank
3. The possibility of renewing or granting loans and making investments by the bank will be reduced.
Yes Founder of the bank Rana Kapoor has been placed under arrest by the Directorate of Execution March 8. CBI issued an observation circular against Mr. Kapoor’s wife, Bindu and their three daughters