Know All about Yes Bank Crisis

By Neeraj Mishra|Updated : March 17th, 2020

Yes Bank which is India’s fifth-largest private sector bank became prone to bankruptcy. Hit by the crisis; YES Bank has now become a major concern for the government. Its revival is led by investor banks where SBI plays major role injecting Rs 7,250 Crore (49% stake capital) while other lending banks include ICICI Bank, Kotak Mahindra Bank and Axis Bank which will invest funds worth Rs 3,100 Crore.

 About Yes Bank Ltd.

 Incorporation- November 21, 2003

 Founded by - Rana Kapoor and Ashok Kapur

 Subsidiaries - Yes Bank, Yes Capital and Yes Asset Management Services

 Provides UPI services- Airtel, PhonePe, Flipkart, MakeMyTrip, Swiggy and others

In the year 2005, Yes Bank entered Retail Banking with the launch of International Gold and Silver Debit Cards in partnership with MasterCard International. In June 2005 their shares were listed on the Stock Exchanges.

  • Economic Times presented it with Corporate Dossier Award in December 2005.
  • In 2006, Bank accepted Financial Express Awards for India’s Best Banks.
  • In the year 2007, Bank made a tie-up with the Agriculture Insurance Company of India (AIC).
  • In 2008, at the FT/IFC Washington Sustainable Banking Awards, London Yes Bank was ranked as No. 1 Emerging Markets Sustainable Bank of the year in Asia.
  • In 2008, Business Today-KPMG Best Banks Annual Survey the Bank was ranked No.1 Bank.

Yes Bank Crisis

What went wrong?

  • The Union Bank of Switzerland in 2015 red-flagged Yes Bank stating that Yes Bank had loaned to companies more than it’s(Yes Bank’s) net worth and those companies had very rare chances of paying back. Still, Yes Bank continued providing loans to struggling firms and sectors.
  • The situation of panic and confusion started when on March 5, 2020, the Reserve Bank of India imposed moratorium restricting withdrawals to a maximum of Rs. 50,000.
  • RBI warned Yes Bank in November 2019 for under-reporting NPA’s (Non-Performing Assets). 
  • With rising bad debts, the reaction of Yes Bank’s depositors was not favourable. They were restraining from opening fresh accounts and existing depositors also started withdrawing.

 Some causes behind this crisis are:  

  1. High NPA’s: Yes Bank like other Banks suffered from the problem of Non Performing Assets. What made the problem bigger for Yes Bank was negligence towards the issue which became massive. Yes, Bank struggled in raising capital that is needed to meet regulatory requirements.
  2. Faulty Governance: The bank suffered due to its faulty governance practices under-reporting its NPAs of Rs. 3,277 Crore in 2018-19.
  3. Domino effect of IL&FS scam: The 90,000 Crore default of IL&FS leading to its collapse. Yes Bank’s stake at IL&FS and DHFL was 11.5% as on September 2019.
  4. Rising Withdrawals: The Bank’s liquidity suffered due to a large number of withdrawals.
  5. Lack of Investors: Due to the bank’s worsening state investors were refraining from investing.

Yes Bank’s Rescue

  • Government has issued a Gazette Notification approving Reconstruction Scheme and said the moratorium will be lifted on March 18 at 6 pm.
  • The Enforcement Directorate will summon all major borrowers of the bank. The list of entities to be summoned comprises Reliance Group (Chairman Anil Ambani), Vodafone Idea, IL&FS, Dewan Housing, Jet Airways, Cox &Kings, CG Power among others.
  • Management and promoters will also be examined and questioned.
  • Yes Bank’s Co-founder and former CEO Rana Kapoor have been arrested already over charges of money laundering and corruption.
  • According to Union Finance Minister Nirmala Sitharaman, the Reconstruction Scheme drawn by RBI got approval by the government and a new board will be set up at Yes Bank with at least 2 directors of State Bank of India.
  • SBI will be required to lock in 26% of 49% of its stake in Yes Bank for three years.
  • This three-year lock will constitute 75% of the rest of the investors’ investments.
  • Yes Bank’s authorized capital which was about Rs. 1100 Crore earlier has now been increased to Rs. 6,200 Crore in order to meet capital raising requirement.
  • RBI is providing liquidity support to the bank to meet deposit outflows when required.
  • 75% Shareholding of Yes Bank’s shareholders will be locked for three years. Shareholders holding less than 100 shares can sell their entire shareholding.

 Yes Bank – New Management


  • Prashant Kumar has been appointed as Chief Executive and Managing Director of the Yes Bank.
  • PNB’s former Non-Executive Chairman, Sunil Mehta has been appointed as Yes Bank’s Non-Executive Chairman.
  • Mahesh Krishnamurthy and Atul Bheda have been appointed as Non-Executive Directors.
  • SBI will nominate two officers as Directors.

According to the government’s notification-

  • Any investor who is permitted to have the voting right of fifteen per cent shall have the right to nominate one director on the board. All board members will be appointed for one year or till an alternate board is formed.
  • The investor bank and other investors will be regarded as ‘public shareholder’ for five years from the date of allotment of shares of the reconstituted bank.


  • YES Bank will be resuming full banking services from March 18th, from 6 pm.
  • In a tweet, the bank said its 1132 branches across India will also be open for its customers.

With this kind of crisis new board’s conduct and governance will be closely looked upon. Restoring faith in the bank will be one of the major concerns for the authorities. 


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