YES … Yes Bank … the 4th biggest private bank of India came on teh verge of collapse . It is in my opinion a very big indicator that we are going through a very severe Banking Crisis . Here we should know that stature of this bank was that big that almost 20 companies had it as it’s UPI partner and 35% of all UPI Transactions in the country used to happen with Yes Bank only . Now we all came to know about it when RBI took control of all the mess going on and implied restriction that one can’t withdraw more than 50000 a day unless in Emergencies . But the problem was there from much long . It’s said that COMMERCE students while giving examples of ‘Badly managed private enterprise’ used to put YES BANK on top always . So we can imagine how severe the situation had become . Let’s see the story from the beginning …..

Yes Bank was started in 2004 by two brothers RANA KAPOOR and ASHOK KAPOOR . But after the death of latter in 26/11 Attacks and a legal tussle between the former Ashok Kapoor’s Wife MADHU KAPOOR in Bombay HC where latter ended up getting the right to jointly appoint directors . But Rana Kapoor continued as the CEO ; what followed was he running the bank in a halphhazard manner . He was giving loans aggressively at higher interest rates just for making impression amd gaining profits . But more importantly he was giving these loans to such parties who didn’t had the credibility or say CREDIT SCORE to get the loans . As a result it was seen that Yes Bank was growing but also it’s NON PERFORMING ASSETS (NPA’s) and Bad Loans were rising at the same time (Loan not repayed after 90 days are NPA’s and then if not paid at all it becomes Bad Loans) .

Though RBI here saw upon inspection there is a 3000 cr. difference between actual NPA’s and the NPA’s shown by Yes Bank , ie , Yes Bank was also concealing it’s reality . RBI in 2018 ordered Rana Kapoor to vacate as CEO by Jan 2019 . Along with him a chairman and two independent directors also resigned . Now , all this slowly led to fall in the ratings of Yes Bank , from Stable to Negative . RAVNEET GILL took over as CEO but the match had gone so out of hands by then that Yes Bank posted it’s first quarterly loss of 1500 cr. and it’s shares surged down by 30% . Even Rana Kapoor himself sold all it’s shares worth 142 cr. Here irony is that just one year back (as a CEO) he was tweeting for his shares “Diamonds are forever , so are the precious shares of Yes Bank and I will also give it to my 3 daughters and their children … even if my term ends I will never ever sell my shares” .

But if we have a look at the companies who took these loans are ANIL AMBANI’s Reliance , SUBHASH CHANDRA‘s Zee Entertainment , Cafe Coffee Day , Essel Group , etc . Basically , major ones are those who share a good rapoort with our prime minister and the ruling party . Though our FM very easily blamed UPA regime but it seems not the case this time . The bad loans of Yes Bank was 55000 cr by 2014 which surged to 2,41,000 cr by 2017 . The big question here is why were the loans being given by Yes Bank even after 2017 when it was under RBI monitoring . Under whose pressure was it all happening because it’s not a government bank . One more thing raising eyebrows here are ADANI group stopped using Yes Bank just 1 day before restrictions were imposed . VADODRA SMART CITY DEVELOPMENT FIRM withdrew 265 cr just before restrictions . These incidents show that some big firms were in close contact with the government knowing what will happen . All these defaulters including RANA KAPOOR are under investigation from where it has came up that Rana Kapoor was in plan of selling properties worth 1000 cr. and then leaving the country .

After RBI took full control shares of Yes Bank fell more drastically after this . SBI purchased 49% of shares of Yes Bank for 2450 cr. due to which even it’s shares fell badly . SBI purchasing the shares will raise the share price and then rest shares will be purchased by some other investors (maybe LIC) which will slowly revive the condition . Well … one assuring thing here is that Yes Bank is a big private bank and government can’t afford to let such a big bank having that great effect on economy collapse . But all this will be done using Taxpayers money so isn’t it just like we are paying the loans taken by Shubash Chandra and Anil Ambani . Why should we ? Though it’s actually good to save such a big bank or else the complications might be uncontrollable . So doing what’s being done now is not Wrong but Unfair ….. unfair on all the honest public . Any simple man if fails to repay the loan we see how brutal is the treatment of banks on them that many even commit Suicide . But these so called FRIENDS of government despite not paying such high amounts are treated like Intellectuals .

The collapse of this bank is also being compared to the PMC bank collapse last year due to similar reasons . But what makes these cases different is the Bank Sizes . PMC has deposits worth of 11000 cr. and employs almost 800 people while YES BANK has 2 lakh crore of deposits and employs more than 18000 employees . So we can understand how major impact this incident can have on the Economy and also one the lives if these many people . One more thing which I guess most of the depositors would have learned by now is that one should not put on all the deposits in the same bank and instead fabricate in into multiple banks so that if one bank collapses or goes through any trouble , not all is lost . Also , if possible instead of cooperative banks public or private banks should be preferred as there the deposits are much saferhaving higher stake and stakeholders . As we saw in PMC case people had deposited their whole lifetime earnings in one bank only and lost everything in a single go .

So , just like SBI is helping slowly all the money of depositors will be brought back . But do you think after reading all this that … SAB CHANGA SI ? No … All is just Not Well in the Indian Banking system . It’s not a case of today or tomorrow , if any of you might remember in 2015 RAGHURAM RAJAN (the then RBI Governor) had gave a list of 17 big names who took loans from banks and were on the path of becoming NPA’s and Bad Loans . He advised government to take strict actions and recover the dues or else we will head towards a banking crisis . But he had to forcibly resign due to the NAMO-Demonetization idea . His successor URJIT PATEL too was serious regarding banking crisis but even he resigned due to some further MODINOMICS . The less we talk of current Governor the better . Everytime Opposition has asked for the names of these debtors the government has just DUCKED the question altogether citing Security Reasons . Now , slowly when the informations came that people like Subhash Chandra and Anil Ambani were responsible for Yes Bank collapse , we come to know whose ‘Security’ the government was actually talking about . RR himself told that it all started from 2007-08 Crisis when a lot of investment were made which created a lot of Bad Loans and continued in the UPA regime as well .

In India the NPL (Non Performing Loans) Ratio (% of bad loans out of total loans) is as high as of 11% but it is only around 2% in any big economy like US or UK . Also the recovery rate after a loan becoming NPA is only 30% in India as compared to around 80% in foreign . For solving this situation , out of the many reforms INSOLVENCY and BANKRUPTCY CODE (IBC) is the biggest reform brought by the government . This Code basically simplifies and unifies the procedure of resolving any case of Insolvency through a one stop solution . This act came into force in 2016 and has 255 sections and 11 schedules . The main aim of this act is to provide feasible one stop solution protecting the interests of small investors . It brings separate procedures for various types of firms by fixing the maximum time limit for resolving the insolvency . The code establishes INSOLVENCY and BANKRUPTCY BOARD (IBB) comprising of licensed personnels who firstly submit a Plea for whsoe acceptance or rejection there are 14 days . After the plea is accepted an Interim Resolution Professional is appointed who takes over complete control and initiates the process .

It basically makes the process viable and less cumbersome and also improve our NPL Ratio and Recovery rate . It mandates that any insolvent asset must be resolved in 270 days . If no one is purchasing the asset and are unhappy with the bids . They should be liquidated at the minimum value necessary . So far more than 50000 accounts coming under IBC , out of the 1484 cases 586 have been closed clocking a Success Rate of 40% . The performance has so far been mixed due to the vested interests , protracted litigation and frequent changes in Law . Cases like ESSAAR and Visa Steel are still pending which shows that we still need to work upon this Law making it more prompt and viable . But we should also keep in mind that in US also it took around 10 years (1978) for this Law to attain some stability (at one point they were even thinking if scrapping it down) . So our performance is remarkable as per the global standards .

So we can see that the Government has tried as much as it’s ability and IBC Code is one of the biggest achievements of NDA Government but still there is a road to walk down which can only be walked if Government controls it’s FRIENDLY nature a bit . It’s also our responsibility to keep a check on what the bank is doing with our money and keep on asking questions from the Government as well . The attitude needs a revival or else we will go deep down inside the of Banking Crisis and will never be able to come back .

JAI HIND

ARUNESH SINHA