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Yes Bank Issue
Why is it in the news?
- The Reserve Bank of India has moved in to take charge of new generation private bank Yes Bank.
- As part of RBI bailout, SBI to pick up 49% in Yes Bank.
More in the news
- Reasons why the RBI superseded the board of Yes Bank:
- Deteriorating Financial Position:
(1) The financial position of Yes Bank has undergone a steady decline over the last few years because of its inability to raise capital to address potential loan losses and resultant downgrades.
(2) The bank was making losses and inadequate profits in the last four quarters.
- Governance Issues:
(1) The bank has experienced serious governance issues and practices in recent years which have led to a steady decline of the bank.
(2) Take, for instance, the bank under-reported NPAs to the tune of Rs 3,277 crore in 2018-19.
- False Assurance:
(1) The bank management had indicated to the Reserve Bank that it was in talks with various investors and they were likely to be successful.
(2) But in reality, there was no concrete proposal from investors to put the kind of money that the bank required to survive and grow.
- Non-serious Investors:
(1) The bank was engaged with a few private equity firms for exploring opportunities to infuse capital as per the filing in stock exchange in February this year.
(2) These investors did hold discussions with senior officials of the Reserve Bank but for various reasons eventually did not infuse any capital.
- Outflow of liquidity:
(1) The bank was facing regular outflow of liquidity. It means that the bank was witnessing withdrawal of deposits from customers.
(2) In fact, the deposits are bread and butter of a bank.
(3) The bank had the deposit book of Rs 2.09 lakh crore at the end of September 2019.
Source
The Hindu