Yes Bank Crisis: Failure of Niche Structuring and misconstruing scrutinization.

“I believe that banking institutions are more dangerous to our liberties than standing armies.”
Thomas Jefferson

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Bank failures can be a repercussion international economic instability due to many onerous determinants to the amalgamation of the loan/advances to the bad debt due to the future perspectives of the loan to be waived off by the government or bankruptcy of the corporate horses rendering the loan to be bad debt in furtherance amounting to be NPAs which will increase with time following the rule of compoundability over ceratin amount of debt over an uncertain period of time.

In India, Bank failures have been under ‘scrutinization’ over years by the governments which once resulted in mass-nationalization and now vis-a-vis subsequently rendering an idea of jointly holding banks together with the purpose of privatization.

Government is super determined towards privatization and the Yes Bank Crisis is an eye-opener as what would be the noxious results of non-intervening of the government with the financial institutions propounding an idea of concrete applicability of democratic socialism which is center-left ideology on the right-left scale.

As the oil crisis is a result of corporate cannibalization where Saudi oil corporations are not owned by the government which made MBS control merely to of a no degree which has resulted into the stock markets go crash as bad as ‘black Monday’ which affected dramatically GAIL and ONGC with Reliance Oil stocks tumbling since last Monday which affected financial institutions even the banking giant state bank of India.

Yes Bank said ‘yes’ to all the bad boys of the corporate industries as the bank opted for niche marketing to gain a competitive advantage in the banking industry which principled the bank to have the cash outflow much in advances and less in loan to the ones who were not good with credit. this resulted in the bank to give loans which were being masqueraded as advances as it includes less bureaucratic process as compared to loans and the interest rates are relatively low as compared to loans. This seemed to be a good profitable marketing strategy as within a time of a decade yes banks became the 4th largest private bank in India.

Reasons for failure post — 2014

It went on a loaning spree with advances rising by 334% between Financial Year 2014 and 2019. As a result, many borrowers started defaulting bank’s gross non-performing asset percentage, which is the percentage of loans overdue for more than 90 days, zoomed to 7.39% as of September 2019, the highest among comparable banks. While bad loans piled up, the bank did not make enough provisions in its profits. Its provisions were the lowest among comparable banks. Goodwill of the bank was on the edge due to several government policies regarding financial policies subject to business class and middle-class family which resulted in the customers withdrew large amounts, resulting in the credit-deposit ratio crossing 100% in 2018–19. That is, it lent more than it received. Evaluation of NPAs was a clanger in last few years as Loan spree and high NPA meant poor profitability, gauged by Yes Bank’s sinking Return on Assets

P.4, Annual Report, 2018–2019, Yes Bank

Finance Minister, Nirmala Sataraman expressed that the government was scrutinizing and was aware of the bank crisis pointing the pendulum of accountability to the former finance minister or the concentration of power in the PM Office.

The Statesman, 6th March’2020

Question is even after the government was aware that the bank is on the loan flee the annual report of yes bank expounds that on the side of government the ignorance was at a superlative degree and now the reconstruction plan of RBI is just a textbook example of ‘socialization of loss and privatization of profit’

P. 4, Annual Reports, Yes Bank

Advances witnessed a sudden rise after demonetization and the government be aware of the bank crisis questions the responsibility of the government against the citizen of the democracy where the advances spiked from 55,633 crores in 2014 to 2,41,500 crore in 2019 with an increase of 2,03,533 crore in 2018 from 1,32,263 crore in 2017. Resulting in direct doubling the advance with a year after the government became aware of the bank crisis.

The total exposure of Yes Bank could be over 2.25 lakh crore but of that, the non-performing assets (NPA) are reportedly around Rs 42,000 crore. As per officials of the Enforcement Directorate (ED), interrogating Yes Bank founder Rana Kapoor, of these Rs 42,000 crore loans that turned into NPAs, Rs 20,000 crore were allegedly offered to some corporate companies and Non-Banking Financial Companies (NBFCs) on Kapoor’s instructions.

Deterioration of the financial health of the banks is now a bigger question as someone has to take the responsibility and accountability of this economic failure. who shall be responsible for this mismanagement? Fairy Prime Minister, Incompetent Finance Minster or Innocent Bhakts.

Note: Bhakts refers to the scholars of WhatsApp university.

“US Dollar is secular. So, is the Rupee” — Kumar Aditya