Magazine

English Hindi

Index

Governance & Social Justice

International Relations

Economy

Economy

Yes Bank Crisis

Yes Bank Crisis

Tag:GS3 || Economy || Banking & Financial Sector || Commercial Banking

Why in news?

  • India Yes Bank bonds slump by record after the stock crash.
  • The share price has gone to the lowest since 2009.

 About Yes Bank:

  • Yes bank limited is an Indian private sector bank.
  • Founded: by Rana Kapoor and Ashok Kapoor in 2004.

  • It primarily operates as a corporate bank with retail banking and also asset management as subsidiary functions.

Bond prices of Yes bank:

  • Yes, the bank has slumped by a record in the bond market this month.
  • Dollar bonds of yes bank ltd. slumped a record 5.5 cents to 80.9 cents on the dollar the lowest since the bonds were sold in 2018.

 When the crisis started?

  • Crisis at yes bank started last year when RBI demanded the bank’s founder Rana Kapoor to step down as CEO.
  • It was following a spat over breaches of confidentiality and regulatory guidelines revealed in their inspections.
  • Since then the bank witnessed an 81% decline in its market stock price.
  • Till now, nearly 40 brokerage firms have given negative rankings to yes bank stocks.

What is the problem?

  • Yes bank has the highest stress among banks both public and private with estimated stress of 54.5% of reported net worth of financial year 2018-19 with a total exposure of Rs 147 billion as of 2018-19.
  • This is followed by Bank of Baroda with 37% stress with Rs 189 billion exposure and IndusInd Bank has 30.4% stress against 81 billion exposure.

NBFC Problem:

  • The bank is at the epicenter of rising stress in India’s credit markets where shock defaults last year by a major infrastructure lender have led to broader strains at other shadow banks.

  • Furthermore, yes bank also has the highest exposure toward entities classifies as high risk such as –
    • ADAG(finance), Cox & Kings, CG power, DHFL, Essar Shipping Mcleod Russel, which was reported as 102.6 billion.
    • For example, India’s yes bank shares sink as jet airways hurts exposure hurts.
  • According to Bloomberg intelligence analyst, the stocks and bonds both are reflecting investor concerns on asset quality where slower resolutions and rising stress could continue to pose pressure.

Concern:

  • Small- and mid-sized lenders are being hit the hardest amid a steady drip of reports of financial irregularities and surging bad loans.

Conclusion:

  • In a regulatory filing, Yes Bank said that it has requested the authorities to form a multi-disciplinary team of experts for detecting the origin of the fake news and assess the short-sell positions, held either directly or indirectly by such accused persons.

 References:

  • https://www.latestly.com/india/news/jet-airways-crisis-effect-yes-bank-shares-plunge-30-805783.html
  • https://economictimes.indiatimes.com/markets/stocks/news/yes-bank-sparks-selloff-in-lenders-as-wary-investors-exit/articleshow/71375613.cms
  • https://www.thehindubusinessline.com/money-and-banking/yes-bank-bonds-slump-following-stock-crash/article29573499.ece