YES Bank once considered as the most reputable and one of the top banks in the private sector, wealth creator for the investors and regarded as the fastest growing bank with 20%-30% growth annually is now under the stress of cash and losses. It lost 87% of its market value since August 2018 becoming the worst performer in the stock market as well as the wealth eroded for the investors. Not long ago in 2018 when its stock was traded more than RS 400 is now trading at Rs 40 more than 10 times low in the history and finding itself on the verge of bankruptcy. So how and why YES bank became No Bank in just a few months. Rana Kapoor one of the most well-known entrepreneurs and promoters of Yes Bank has been into the banking sector from the past four. He started his career with Bank of America and later he went on to become an investment banker since he was so much in love with the banking industry he negotiated a deal with RBI to open his bank which as we know as YES bank.
To know the reasons behind the present situation we need to look back on the action which went on behind the curtains of the Yes bank. The basic working of a bank is to generate revenues from the interests which are collected from the loans provided to lenders from the depositor’s money. But it is very difficult for a bank to work if the loans which are given, not being pooled back into its account hence resulting in NPA (Non-Performing Asset). For example, if a bank has ₹100 in its account from the depositors and it lends forward that money to 10 different people, now when the lenders return the money to bank with interest it becomes banks earning but in some cases out of this 10 people some may not be able to return the loan hence it becomes NPA for banks. But Yes bank being a corporate centric bank it was playing big with high risk so when economy was booming it made big bets by lending large sums of money to big players in the market and hence got a decent amount of return from the interest on the loans but now in recent time when economy dipped the bank also got dipped and the major lenders of the companies like JET AIRWAYS which got bankrupt and IL&FS which trembled down in ashes were not able to repay back their loans. Since most of the loans were divided into these companies the bank’s revenue got hampered heavily. It was estimated that Yes bank a few years back was not been able to retrieve 20 paise from a loan of ₹100 but now the situation has turned to be worse as it is not able to retrieve ₹2.50 from a loan of ₹100 and according to analysts it’s an Armageddon so the bank needs to act fast and get into its system as soon as possible.
When such losses came out in the market Chairman of the bank was removed and a new CEO from DUCHTE Bank is brought in. The new CEO plans to raise around 2 billion dollars and from past 9 it progressed a lot. CEO confirmed that many investors are ready to pump in the money for the bank. The banks plan and the investors which shown their interest are:
Erwin Singh Braich, a mysterious Canadian tycoon bidding jointly with Hong Kong-based SPGP Holdings. Braich says he’s Canada’s richest man, but he “has no headquarters, no banker to manage his money, and is currently living in a three-star motel in the Canadian prairies but since of his anonymity the RBI is sketchy on his investments.
YES Bank said it was considering a $500 million investment offer from London-based Citax Holdings Ltd.and Citax Investment Group in what would be a vital financial lifeline for the private lender. And the CEO also confirmed that it will A final decision on the investment, which is proposed to be made through a preferential allotment, will be taken at the bank’s next board meeting.
The is GMR group and other top us fund houses which are ready to contribute in the bank
Deep-pocketed bankers like UDAY KOTAK is looking to buy a stake in YES bank as it can grow more rapidly and along with Kotak there are many other Indian investors like Aditya Birla family and Rekha Jhunjhunwala
As the bank is posting its rising non-performing loans quarter on quarter which was reported to be around 7% and Moodys rated the bank to be in the junk bond category i.e. B2, it needs to react fast and take control in the cockpit otherwise it can crash soon and diluted and be a part of any public bank under the government the officials said they are trying hard to save the bank and saving it otherwise it is no longer than we see YES Bank as a NO BANK and RBI on the course to find its perfect match for the marriage.
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