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YES Bank depositors should be patient until the real culprit is caught

Yes Bank is India’s fourth largest private sector bank that has been growing at a brisk pace. It is primarily a Corporate bank which means that a large part of the loan is given to Corporates and substantial business is generated from this segment. Such a bank gets in trouble when Corporate borrowers are not in a position to repay back loans. Given the fact that the corporate sector was facing a stoppage, Yes Bank was seeing defaults in its books. Further, in the Reserve Bank of India (RBI) audits, it became apparent that Yes Bank was under-reporting such non-payment of loans. In order to cover for such non-payment of loans, the bank falls back on its capital and in case it has adequate capital, it can keep on functioning properly. In the case of Yes Bank, it is suspected that such non-payment losses are very large and hence their current capital is not sufficient to cover such fatalities. Thus, in order to revive the bank, the current management was trying to raise capital which they were unable to. Given their inability to raise capital the bank would have had to shut down, however RBI has stepped in to prevent such an eventuality.

Yes Bank came into existence in the year 2003 when it was formed by Rana Kapoor and Ashok Kapoor but when the latter expired in Mumbai 26/11 terrorist attack, Rana Kapoor took over complete control of the Bank. While Kapoor is famous as a risk taker, Ashok Kapoor was a old-fashioned person. After Ashok died, Rana randomly gave loans to loss making companies. But in due course, Yes Bank never showed  the actual data and always gave a manipulated data to hide losses of stressed asset. UBS a global firm first raised the issue regarding loan given to stressed asset, but that wasn’t creating much problems for Yes Bank. Gradually the exposure of Yes Bank to bad companies was rising. The bank gave loan to several companies like DHFL, once the company was unable to repay the loan, problems for Yes Bank started increasing. In 2018, the market cap of  the Bank was Rs. 1 lakh crore which came down to 5000 crore in one and half years. When the RBI realised that there was some problems in the Yes Bank, it refused to extend the term of Rana Kapoor and revised his term to 31st January 2019. Soon after, the stock price of Yes Bank started falling. Rana Kapoor pledged his share which was not known though it was known that he had shareholding of 11 per cent at one time which was worth around Rs. 9000 crore which he slowly reduced to 1 per cent. Loans worth Rs 20,000 crore out of Rs 30,000 crore sanctioned by Rana Kapoor, during his tenure as chief of the crisis-ridden Yes Bank, turned into bad debts, the Enforcement Directorate (ED) told a special Court last Wednesday. According to news agency PTI, the submission was made by the ED to a Prevention of Money Laundering Act (PMLA) court in Mumbai which extended Kapoor’s custody till 16 March after the agency sought remand for further probe.

Kapoor, who was arrested by the ED is facing a probe from the ED and the CBI over allegations that he received kickbacks through scam-hit Dewan Housing Finance Corporation Limited’s (DHFL) Rs 600 crore loan to a family-owned company. Kapoor’s wife and three daughters are also among the 13 accused named by the CBI in the case. As many as 44 companies belonging to 10 large business groups reportedly accounted for bad loans of Rs 34,000 crore of Yes Bank, PTI reported, adding that nine firms of Anil Ambani-led Reliance Group reportedly owed Rs 12,800 crore while the Essel Group had unpaid loans of Rs 8,400 crore.

Last week, Yes Bank was placed under a moratorium by the RBI which took control of the Board and also imposed a Rs 50,000-limit on withdrawals from the bank after the central bank cited “serious deterioration in the financial position of the Bank”. Since then, the country’s largest lender State Bank of India (SBI) has shown interest in buying up to 49 per cent stake in the beleaguered private lender, as a part of its restructuring plan.

Mainly, RBI has intervened in the management by putting a cap on withdrawal. There may be some hardships to the customers, but this action has been taken to protect the interest of depositors. Unhealthy practices followed in lending and classification of the advances not done correctly are prime reasons for the crisis. The Yes Bank has lost its credibility on account of unethical banking practices followed by them. The bank has been put under moratorium to gain some time to study the situation and find out solutions. The bank is not going shut down the doors. All deposits will be safe. To understand this, one must know how a bank functions. Deposit of every 100 rupees made in any bank by a customer, the bank has to deposit 21.50 rupees with RBI as SLR ( statutory liquidity ratio) in the form of government securities, bonds and 4 rupees as cash with RBI. This is the reserve fund maintained with RBI. The balance amount only is lent to the borrower to pay interest for the deposit of 100 rupees. As the borrower would have invested in various assets to generate income to pay interest on the borrowed – big medium and small. All the deposits are invested in various loans and advances. Some of the advances might have been taken with bad motives and those have to be identified and be recovered from the culprits and the accountability also should be fixed. Then only such unwanted things will not happen. The Indian legal system is toothless and will threaten as if something is going to happen, but in reality it is not so. One example is that one SARFAESI act was brought in to solve the problems of the NPA accounts without the intervention of a court because trying to find a solution to NPA accounts in our legal system it takes five to seven years. When the banks were trying to recover the money from the stressed assets, the court started interfering and issuing stays. In any sector bad and selfish people will be there and because of these, problems come. Like that only Yes Bank has been saddled with good amount of NPA accounts. On account of NPAs, hefty provision has to be made which has resulted in capital reduction or erosion. If all the customers demand money immediately, it will not be possible to realise the money from the borrowers and pay them on demand. But all the deposits are safe and will be paid. To chanellise the withdrawals, a cap has been fixed for smooth solution of the problem. This action has been made by RBI as a controller as well as a supervisory bank. Already a structured plan has been displayed calling for opinions from all the stake holders in the bank including the investors. After that a final call would be taken by the RBI and the Government of India. The depositors have to be a bit patient and try to help the government and RBI to find the culprits so that they be punished.

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Dr Vaidehi Taman
Dr Vaidehi an Accredited Journalist from Maharashtra is bestowed with Honourary Doctorate in Journalism, Investigative Journalist, Editor, Ethical Hacker, Philanthropist, and Author. She is Editor-in-Chief of Newsmakers Broadcasting and Communications Pvt. Ltd. for 11 years, which features an English daily tabloid – Afternoon Voice, a Marathi web portal – Mumbai Manoos, monthly magazines like Hackers5, Beyond The News (international) and Maritime Bridges. She is also an EC Council Certified Ethical Hacker, Certified Security Analyst and is also a Licensed Penetration Tester which caters to her freelance jobs.

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