Yes Bank Crisis – Reasons and Resolutions | Fusion - WeRIndia

Yes Bank Crisis – Reasons and Resolutions

Yes Bank Crisis – Reasons and Resolutions

The collapse of Yes Bank troubled its customers.

Reserve Bank of India capped the withdrawal limit to ₹50,000 for Yes Bank depositors per month.

Several depositors were unable to withdraw money from ATMs as they have run out of cash. They are unable to use net banking services as well.

In this context, several customers complained that the bank had not intimated about the capping of withdrawal limit.

But, what are the reasons for the crisis for Yes Bank?

Here are the reasons for the collapse of Yes Bank:

  • The crisis of the bank is not a sudden one. Over the last few years, the financial position of Yes Bank has been deteriorating. The bank was making losses in the last four quarters.
  • The bank was experiencing serious governance issues which led to a constant decline. For example, the bank under-reported NPAs to the extent of ₹3,277 crores in 2018-19.
  • RBI has been trying to strengthen the liquidity of Yes Bank. But the bank had given fake assurance to RBI saying that it had several investors to improve its finical position despite there being no concrete proposal in reality.
  • The bank contacted a few private equity firms to invest in it but they were not serious investors.
  • The bank does not have any market-led revival near at hand.
  • The bank has more outflow of liquidity than deposits. Customers were withdrawing money rather than depositing it into the bank.
  • To revive Yes Bank, RBI has taken certain measures.

Here are the details about crisis resolution scheme:

  • RBI kept Yes Bank under a 30-day moratorium period. It also appointed former State Bank of India CFO Prashant Kumar.
  • The monthly withdrawal limit for the customers has been capped.
  • As per the directions of the RBI, State Bank of India expressed its willingness to invest in the bank and picked up a 49% stake in Yes Bank to reconstruct it.
  • All the employees of the bank shall continue in the service with the same remuneration for at least a year.
  • New board of directors shall be appointed by the RBI and SBI.

Image Credit: Akedia1 / CC BY-SA 3.0

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