case study of yes bank

Yes Bank Case Study: Business Model, Financial Statement, SWOT Analysis

Yes Bank is well-known for its pioneering approach and expertise in digital banking. The bank’s journey has been marked by both successes and setbacks as it strives to adapt to changing market conditions and regulatory needs. Despite the hurdles, Yes Bank has continued to demonstrate resilience.

Today’s blog presents a case study on Yes Bank, which includes insights into the bank’s journey, business model, and current financial position. 

Table of Contents

Yes Bank Overview and History

Yes Bank is a private sector bank with its headquarters located in Mumbai, India. It is known for its technology-driven approach and offers a wide range of products and services for retail, MSME, and corporate clients. The bank also offers brokerage services through its subsidiary, YES Securities.

Yes Bank was founded in 1999 by Indian bankers Ashok Kapur, Harkikat Singh, and Rana Kapoor. They worked with Rabobank from the Netherlands, who owned a majority stake. In 2003, it was renamed as Yes Bank. A banking license was granted in 2004, and in 2005, the bank went public through an IPO.

The bank has a pan-India presence with 1,198 branches and 1,345 ATMs. It also has an international banking unit (IBU) at GIFT City and a representative office in Abu Dhabi.

The RBI Takeover!

In 2018, the bank’s financial health began to deteriorate due to asset quality issues and concerns regarding corporate governance.

In 2020, the RBI took control of the Bank and fixed limits on withdrawals to protect depositors. A reconstruction scheme was implemented, with investors infusing INR 12,000 crores. These investors included the State Bank of India, ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, etc. State Bank of India took a 49% stake and was the lead participant.

Yes Bank has been restructured under a new management to regain trust and stability. The bank has been focused on improving asset quality and strengthening its risk management framework.  

Business Model of Yes Bank

Yes Bank is a full-service commercial bank offering a comprehensive range of financial products and services to individuals, small and medium-sized enterprises, and large corporations.

The business model mainly revolved around three segments:

• Retail Banking – This segment serves individual customers by offering various products and services, including savings accounts, current accounts, deposits, loans (home, personal, auto), credit cards, investment advisory, and wealth management.
• SME & Corporate Banking – This segment caters to small and medium-sized businesses and large corporations. It provides different financial solutions such as working capital finance, term loans, cash management services, trade finance, and advisory services.
• Investment Banking – Through its subsidiary, YES Securities, the bank provides investment banking services such as equity and debt capital markets, mergers and acquisitions, and financial advisory.

Furthermore, the bank positions itself as a technologically advanced institution, blending innovation and services to deliver a smooth banking experience. Customer satisfaction and digital banking have set it apart from others.

Market Data of Yes Bank 

Financial statements analysis of yes bank, income statement.

Balance Sheet

Cash Flow Statement

Key Performance Indicators (KPIs)

Swot analysis of yes bank..

• Yes Bank has a strong brand image and is still recognized by customers for its innovative products and services, even after the crisis.
• It has been a leader in digital banking, providing a strong online and mobile banking platform.
• Its presence in retail, SME, and corporate banking provides a stable revenue stream.
• The bank has gone through considerable financial instability in recent years, which has raised concerns about the quality of its assets and the adequacy of its capital.
• Most of Yes Bank’s loan portfolio is concentrated in the corporate sector, leading to an increased risk of NPAs in case of defaults.
• Yes Bank’s recovery largely depends on external funding, which can be risky.

Opportunities

• The bank can benefit from the growing demand for digital banking services in India by expanding its customer base and enhancing service quality.
• It also has an opportunity to expand its operations into underserved markets, especially in rural and semi-urban areas.
• The government’s efforts to strengthen the banking sector through policies like financial inclusion and digital India can create growth opportunities.
• The Indian banking sector is highly competitive, with both public and private banks and fintech companies vying for market share.
• Enhanced regulatory needs and vigilant oversight have the potential to significantly influence banking operations and profitability.
• Yes Bank faces cyber security threats as it expands digitally, which could cause financial and reputational harm.

From facing a severe liquidity crisis to being rescued by a consortium of financial institutions, the bank has undergone drastic changes in its leadership and operations. It remains to be seen how the future unfolds for Yes Bank and whether it can regain its stability and trust in the market. However, the bank has shown impressive resilience in its recovery. While challenges persist, the future of Yes Bank appears promising. However, it is advised to consult a financial advisor before investing.

Frequently Asked Questions (FAQs)

When did the rbi take control of yes bank.

The Reserve Bank of India (RBI) took control of Yes Bank in March 2020.

Who is the CEO of Yes Bank?

Prashant Kumar is the Managing Director and CEO of Yes Bank.

Is Yes Bank listed on stock exchanges?

Yes Bank is listed on NSE and BSE.

What is the current market price and market capitalization of Yes Bank?

The market price of Yes Bank is INR 23.8, and the market capitalization is INR 74,610 crores on 5 August 2024.

Should I invest in Yes Bank?

Investors should thoroughly analyze the financial statements and consider other factors affecting the banking industry before investing in Yes Bank.

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Yes Bank Crisis and Reconstruction: Explained

Last updated on September 28, 2023 by Alex Andrews George

Banks play a pivotal role in the economic growth of the country. Failure of a bank, irrespective of the ownership, private sector or public sector, can impact everyone. Hence, neither Government of India nor Reserve Bank of India (RBI) never lets a bank – facing troubles in its financial position – to fail.

Yes Bank Ltd, one of the major private banks in India, has been facing the problem of rapidly deteriorating financial position. This necessitated Reserve Bank of India (RBI) to take immediate action in the form of a reconstruction scheme to protect depositors money.

Table of Contents

YES Bank History

Yes Bank, started in 2004, is one of the new generation private banks that were allowed to start banking operations by Reserve Bank of India in the post-liberalisation era. The bank was founded by Rana Kapoor and Ashok Kapur.

The bank engaged in highrisk lending, providing loans to those who could not raise funds elsewhere.

The assets books of Yes bank showed promising growth until 2017 when the problem of Non-Performing Assets (NPAs) came into the highlight.

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How big is YES Bank?

YES bank is currently India’s fifth-largest private sector lender.

Yes bank had deposits of Rs. 2 lakh crore . Its total assets including loans given are Rs.3.5 lakh crore .

The bank has 18000+ employees and has more than 1100 branches and 1300 ATMs.

YES Bank Crisis

Loans not repaid is a major issue of most banks in India. These bad loans are called Non-Performing Assets (NPA). The Gross Non-Performing Assets of YES Bank was 7.4% of the gross advances at the end of September 2019. It became 18.87 per cent of the bank’s total loan book (or Rs 40,709.20 crore) at the end of December 2019.

The crisis at YES Bank started when the huge NPA issue at YES Bank became public.

For the quarter ended December 2019, Yes Bank reported a loss of Rs 18,564 crore compared to a profit of Rs 1001 crore in the same quarter in 2018. The bank’s net loss would have been wider at Rs 24,778 crore in the third quarter if it weren’t for a tax write-back of Rs 6,214 crore. In the preceding quarter, Yes Bank had reported a net loss of Rs 600 crore.

The founder Rana Kapoor had personal connections with most of the high-level industrialists who sought his help for loans, which went not repaid. Some of the big defaulters to whom the bank had advanced funds included IL&FS, Anil Ambani group, CG Power, Cox & Kings, Café Coffee Day, Essel group, Essar Power, Vardaraj Cement, Radius Developers, and Mantri Group.

The Bad loans of Yes Bank are estimated to be around Rs.40000 crore (Gross NPA) . While the Gross NPA was around 19% of advances, Net NPA was around 6% of loans at the end of December 2019.

Eroded capital base

The overall capital adequacy ratio dropped to 4.2 per cent from 16.3 per cent in the preceding quarter.

The capital base – specifically the Core Equity Tier-1 ratio – fell to 0.6 per cent at the end of the quarter compared to 8.7 per cent in the September quarter. The minimum regulatory requirement stands at 7.375 per cent.

Breach of RBI mandated ratios

YES bank’s statutory liquidity ratio has breached the RBI’s minimum requirement and so has its liquidity coverage ratio. The bank has thus provided Rs 86 crore as a penalty to the central bank.

Governance Issue: Under-reporting of NPAs

It is not just that Yes Bank had NPAs, but it under-reported NPAs which was later found out by RBI. This led to the end of the tenure of the founder Rana Kapoor as the CEO (2018).

Deposits vs Loans

In the last five years, the loan book grew by over four times, but deposits failed to keep pace with loan growth. The loan book grew to ₹2,24,505 crore as of September 2019, while deposits were at only at ₹2,09,497 crore.

Unusual increase in loans given from FY 2014 – FY 2019

As per news reports, the loan book of Yes Bank had grown from Rs. 55,000 crore in FY 2014 to Rs. 2,41,000 core in FY 2019. When overall bank credit during the above period grew only by about 10 per cent, it unusual to notice that YES Bank’s loan book grow by about 35 per cent.

Rumours spread through social media

Rumours spread through social media about the possible collapse of Yes Bank when it was capable of managing its balance sheet, added fuel to the fire. Many false news and rumours resulted in shrinking of the deposit base of YES bank.

As on Dec. 31, 2019, the bank’s outstanding deposit base stood reduced to 1.65 lakh crore from Rs 2.09 lakh crore on Sep. 30, 2019. The lender continues to see an outflow of deposits since Dec. 31; its total deposits stood at Rs 1.37 lakh crore, as on Mar. 5.

The bank’s failure to raise fresh capital

As the bank had a lot of bad loans (in the tune of Rs.10,000+ crore), it needed fresh capital to manage its operations. The bank’s failure to raise capital led to rating downgrades, which made capital-raising even more difficult.

RBI moratorium

All the above factors led the RBI to conclude that there was no “credible revival plan” from the end of YES bank and so “in the public interest and the interest of the bank’s depositors” there was “no alternative” but to place the bank under a moratorium.

RBI to took over from YES bank board for 30 days. The central bank has appointed deputy managing director and chief finance officer of State Bank of India, Prashant Kumar, as an administrator of the bank.

The Central Bank of India then imposed limits on withdrawals to protect depositors.

Reserve Bank of India under Sub-section (1) of Section 45 of the Banking Regulation Act, 1949, the Government of India has made an Order of Moratorium in respect of Yes Bank Ltd. under Sub-section (2) of the said Section for the period from 5th day of March 2020 and up to and inclusive of the 3rd day of April 2020.

Yes Bank Ltd. Reconstruction Scheme, 2020

Reserve Bank of India (RBI) stated that State Bank of India (SBI) has expressed its willingness to make an investment in Yes Bank Ltd. and participate in its reconstruction scheme . Therefore, as per the of the powers conferred by sub-section (4) of section 45 of the Banking Regulation Act, 1949, the Reserve Bank of India, proposed the details of the scheme for raising fresh capital for Yes Bank.

The authorised capital of the Reconstructed bank

As per the government notification, the Authorised Capital of the Reconstructed Yes Bank shall stand altered to Rs. 6200 crore from the Rs.1100 crore earlier. The number of equity shares will stand altered to 3000 crore . The capital of the reconstructed bank at Rs.2 face value per share would be Rs. 6000 crores.

Authorised preference share capital shall continue to be Rs 200 crore.

How much should the investor bank invest?

The investor bank (Eg: SBI) can purchase up to 49% in the reconstructed YES bank. The investor bank should purchase each share at price not less than Rs.10 (ie at a premium of Rs.8 ).

So, if SBI is purchasing 49% of 3000 crore YES Bank shares at Rs.10 per share, that would mean it will be investing Rs.14700 crores to purchase 1470 crore shares of the private bank. SBI had approved an investment of Rs 7,250 crore in Yes Bank by purchasing 725 crore equity shares.

PS: The Main Investor bank (SBI) is not allowed to reduce its holding below 26% before completion of three years from the date of infusion of the capital.

New Investors in YES Bank

Apart from SBI, YES Bank got a lot of new investors as well.

ICICI Bank and Housing Development Finance Corporation Ltd announced that they will be investing Rs 1,000 crore each in Yes Bank’s equity. Axis Bank and Kotak Mahindra Bank will be investing Rs 600 crore and Rs 500 crore respectively. Bandhan Bank will be investing Rs 300 crore.

Existing shareholders own 255 crore shares, and they will end up with a roughly 8.5% stake in the company.

The balance 41.5% stake will presumably be held by other institutions and investors, who will need to infuse roughly ₹ 12450 crores, assuming the acquisition price is ₹ 10 per share.

Expected total new investment in YES Bank

The total new investment expected in YES bank in the near future from SBI and other investors in the company is expected to be at least Rs.27150 crore.

Writing down of AT-1 bonds

In a separate disclosure made to exchanges, Yes Bank said that the additional tier-1 bonds issued by the lender would need to be written down since the bank has reached the ‘point of non-viability’ trigger.

As per Basel rules, AT-1 bonds are loss-absorbing capital instruments and should be written down when a bank breaches certain thresholds of core equity tier-1 capital.

The bank has Rs 8,415 crore in such bonds outstanding.

Is the new deal a merger of YES Bank with SBI?

The current deal is not a merger with SBI rather an equity investment by SBI in YES BANK.

PS: Merger with SBI is also a promising deal for YES Bank and its depositors. However, the merger of the private bank with the state bank is something which would be worked out only if the current investment deal does not bring the desired results.

Will YES Bank be shut down?

The government or RBI has no plans to do that. The deal is not even a merger scheme, but a plan to revive the private bank to its old glory.

Is the Yes Bank Crisis over?

Hopefully yes, if the reconstruction scheme is properly implemented.

From the depositors perspective, their hard-earned money may get locked up for a few more weeks. However, as assured by the Finance Minister, their deposits will be protected.

Once the reconstructed bank resumes its operations, and gets backs the loans given, gradually YES bank may be back to normal. All we can do now is to wait and watch.

YES Bank-SBI Deal

SBI board has given in-principle approval of exploring the possibility of picking up a stake of up to 49 per cent in Yes Bank. The draft plan is out. However, the deal is not finalised yet.

The best possible Scheme for the reconstruction of YES Bank

The SBI investment in Yes Bank is the best deal the capital-thirsty private bank can ask for. The presence of a credible name like SBI is very important for a resolution.

If the deal goes as per plan, depositors of YES Bank are in safe hands and have nothing to worry about. The survival of YES Bank is critical to preventing a contagion in the banking industry.

Rajnish Kumar, SBI chairman sounded confident of implementing the restructuring proposal for YES Bank before the 30-day RBI imposed moratorium period ends. Once YES Bank was out of moratorium it would be run by a professional team.

Main Stake Holders

• Depositors in YES Bank
• Investors in YES Bank (shareholders)
• Investors in SBI (shareholders)

The primary objective of RBI or government in a crisis like that of YES Bank is to safeguard the hard-earned money of depositors. RBI assured depositors of the bank that their interests will be fully protected and there is no need to panic.

The next priority is to safeguard the interest of investors (shareholders), however, this does not seem to be easy.

Yes bank’s shareholders would surely be the biggest losers. Going by the experience of banks placed under moratorium earlier by RBI, shareholders are unlikely to be compensated.

Shares of Yes Bank, which traded at 404 rupees at its peak in August 2019, fell to a record low of 5.65 rupees on March 2020, with the stock plunging nearly 85%.

Most of the shareholders of YES bank will be happy to see a credible investor like SBI investing heavily in YES Bank. However, the shareholders of SBI is worried about the top public sector bank’s investment in a loss-making private bank, which may not give any immediate returns.

The issue of conflict of interest in SBI Investment in Yes Bank

Will there be a conflict of interest when a public sector bank invests in a private sector bank? Will the SBI pull-out customers of Yes Bank into its database? Will deposits move out from YES Bank to SBI.

SBI chairman believes that there is no conflict of interest.

The plan is to keep YES Bank and SBI separate, leaving scope for the state-run lender to exit the investment when YES bank turns profitable.

The solution for YES Bank Crisis

SBI should take over the loan book of YES Bank, recover the loans, and return the depositors money.

The new draft scheme proposes full repayment of all deposits, dilution of equity, and write-off of Rs 10,800 crore of additional tier one (AT-1) bonds.

YES Bank and RBI

The Reserve Bank of India (RBI) already facing criticism on major supervision lapses in cases like Punjab National Bank (PNB) and Punjab and Maharashtra Cooperative Bank (PMC), couldn’t have afforded Yes Bank to fail.

Yes Bank Crisis: Why RBI missed seeing the signs?

Reserve Bank of India did notice pressure points as early as 2017, which eventually led to the regulator denying extension to the then MD & CEO Rana Kapoor, despite the board’s endorsement.

However, RBI failed to come up with a concrete step like pooling SBI into the scheme of things until things became worse.

If the government and RBI acted earlier, they could have gained the confidence of depositors and retained much of the money. Also, the painful steps like moratorium and restriction on the withdrawal – which results in the loss of people’s confidence in the economy – could have been avoided if they acted earlier.

Yes Bank Crisis: It is time to reform RBI?

RBI is burdened with too many responsibilities.

The government must reduce the RBI’s responsibilities so that the central bank can focus on the key areas.

A few suggestions: The securities regulation should move to the Securities and Exchange Board of India (SEBI); debt management should be given to an independent debt management agency, and infrastructure systems operated by RBI should be corporatised.

As mentioned before, a specialised independent mechanism (resolution authority) should be directly monitoring the performance issues of banks like Yes Bank. Most of the G-20 countries have built specialised capabilities to resolve failed financial firms. Such a mechanism can keep a check on the regulator’s tendency to delay recognition of failure, thereby ensuring quick and orderly resolution.

Wilful Default vs Non-Wilful Default

Bank robbery is an initiative of amateurs. True professionals establish a bank. — Bertolt Brecht.

The government and RBI should analyse the default in the case of loans taken by corporates is willful or not.

If it is wilful, a detailed investigation should be done regarding the background of the tie-ups between Yes Bank and its corporate clients. An enquiry should be conducted regarding indiscriminate lending and fund usage in the last 3 years – when the investment climate was utterly gloomy that only a few genuine companies were seeking loans for fresh investment.

If it is not wilful, the root cause lies in the pain points in the economy which should be identified and corrected.

Bank Crisis and Bailouts in India

The bailout is the act of giving financial assistance to a failing business to save it from collapse.

In India, how many banks have failed?

In India, no scheduled commercial bank has been allowed to collapse (or fail) since 1991.

The central bank and the government have always made sure that a failing bank gets acquired before it drowns.

Only cooperative banks have failed here. As per figures from the Deposit Insurance and Credit Guarantee Corporation (DICGC), authority that provides deposit insurance in the country, the cases of about 350 such banks have been settled so far for a payout of Rs 4,822 crore in claims.

RBI will not allow any scheduled commercial bank to fail

In India, most of the scheduled commercial banks are considered entities which are ‘too big to fail’.

A previous example is the case of Global Trust Bank. Global Trust Bank was merged with Oriental Bank of Commerce to avoid failure.

Depositors will not lose money

Finance Minister Nirmala Sitharaman, RBI governor Shaktikanta Das, and SBI chairman Rajnish Kumar had assured that the money of depositors will be safe.

In the recent past, there are no instances in India where depositors lost money in case of a scheduled bank collapse.

Moratorium by RBI and its impact

The market was enthusiastic with the news of SBI intervention as an investor in Yes Bank. However, the moratorium (temporary prohibition of an activity) and equity dilution plan shocked investors and depositors alike.

Probably the moratorium was needed to prevent further erosion of deposits because of any rumours or insider news.

Once the reconstructed YES bank starts functioning, the banking process should hopefully be back to normal. There might be a delay for depositors to get their money back, however, this should not mean losing any hard-earned money.

Private Bank vs Public Sector Bank: Which is safe?

Public Sector Banks have 51% or more of the government equity stake in it. However, with respect to the safety net of depositors, private banks and the public sector banks are almost the same.

If a bank fails, the maximum insurance amount is limited to Rs.5 lakh per account for both private bank and public sector bank.

However, be it a private or public sector bank, government and RBI would normally intervene much before the bank goes beyond redemption. The resolution may be in the form of additional equity or a merger with a stronger bank.

RBI norms to protect depositors from a bank collapse

Scheduled commercial banks include private banks and public sector banks. Both are supervised and regulated by RBI. They have the same norms as well.

They cannot lend the entire money that they have received from depositors: 4 per cent of these deposits has to be kept aside as cash reserve ratio (CRR) and 18.75 per cent as the statutory liquid ratio (SLR).

Also, these banks have to maintain adequate capital when compared with risky loans given. This requirement is known as the capital adequacy ratio (capital-to-risk weighted assets ratio [CRAR]). CRAR is currently at 9 per cent.

Has any bank of YES bank’s size failed in India in the past?

Apart from co-operative banks, no scheduled commercial bank in modern India has failed to result in loss of depositor money.

RBI has always stepped in to bail out ailing banks – often merging it with another stronger bank or infusing extra capital, and thus protecting the depositor money.

This is the first time the central bank has taken such drastic action like moratorium with respect to a big bank like Yes Bank.

A near similar instance was in July 2004 when the RBI got state-run Oriental Bank of Commerce to take over Global Trust Bank to rescue the private sector lender.

Recent Bank Bailouts

Recent examples:

• IDBI Bank Crisis – In 2018, the government got LIC to bail out IDBI Bank with a Rs 21,624 crore capital infusion.
• PNB Bank Crisis – In 2018, the government paid the scam-hit Punjab National Bank (PNB) Rs 2,816 crore as a capital infusion from the via a preferential allotment of equity shares.
• PMC Bank Crisis – In 2019, the Punjab & Maharashtra Co-operative Bank Limited was been put under restrictions by RBI, after an alleged Rs 4,355 crore scam came to light. PMC bank may be merged with Maharashtra State Cooperative (MSC) Bank in the near future.

Which will be the next bank that will be in crisis?

Nobody can be sure of any bank.

The balance sheets of other banks too may be inflated, like what happened with YES bank. Only an independent and efficient audit check can find out the real issues.

RBI needs to more cautious with the scrutiny of the balance sheet of private and public sector banks.

Is it a good idea to bail out private banks using taxpayers money?

In this case of reconstruction of Yes Bank, which is a private bank, the investment from State Bank of India (a public sector bank) will be used. Public Sector Banks like SBI has 51% government’s share – which is taxpayers money.

There are many who raise concerns in wasting taxpayers’ money to bail out failing private entities. This quick remedy of government’s indirect investment in private firms is also against the current principle of the State exiting from even public firms.

However, considering no other alternative now, this bailout should be seen as an exception rather than the rule.

Should RBI keep on bailing out ailing banks?

When the cost of not bailing out an ailing bank for the economy and banking system is far higher than bailing out, this looks to be the only option.

If a bank collapse ruining depositors money, the repercussions will be huge.

That will not be limited to the banking sector but will affect the economy as a whole. It will also have social and political ramifications.

Banking Sector Reforms

Indian Banking Sector is going through a tough time. It’s time for immediate reforms like the merger of banks, bank resolution authority etc. Also, the root cause of the NPA issue should be identified and properly addressed.

Proper Solution to the Twin Balance Sheet Problem (TBS)

Previous Economic Surveys of India had already talked about the twin balance sheet problem of India.

The problem of banks is often not a balance sheet problem at the bank’s end alone. It is also a problem of the corporates to which it gave loans.

Why are the corporates not repaying the loans-taken?

Every time, it may not be a wilful default.

The government policies, rules, regulations, or even Supreme Court judgments might be the bottle-necks for corporate houses to run a business smoothly, earn a profit, and repay the loan.

Deposit Insurance

India is one of the countries that offer the lowest protection to depositors in cases of a bank failure. Whatever be the deposit in the bank account, only deposits up to Rs.5 lakh is covered by deposit insurance. (Budget 2020)

Deposit Insurance should be increased further to increase trust in the banking system.

In India, deposit insurance is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC) , a wholly-owned subsidiary of RBI. DICGC collects a premium of 0.05% on the entire outstanding deposit from banks (and not from depositors).

The need for a resolution authority

A Resolution Authority is needed to take over failing banks and either run them temporarily, sell them, infuse equity or, as a last resort, liquidate them.

Financial Resolution and Deposit Insurance (FRDI) Bill was introduced in Parliament in 2017 to create a Resolution Authority. Unfortunately, it got mired in controversy. To address concerns with the Bill, the Union Budget 2020-21 raised the deposit insurance cap to Rs 5 lakh.

The Finance Minister has subsequently announced that the FRDI Bill will be brought back to Parliament. The Yes Bank moratorium should help put the bill on a fast track.

Merger of Banks

To strengthen the Indian Banking sector, the Central Government of India has announced the merger of ten public sector banks into four banks.

After the merger of banks, the country will have 12 public sector banks instead of 27.

Yes Bank was one of the highest-rated new generation private banks until 2017 when the bank started to face serious bad loan issue.

To stabilise the bank, Yes Bank Ltd. Reconstruction Scheme, 2020 was introduced by the Reserve Bank of India. RBI had also imposed temporary restrictions regarding the withdrawal of deposits.

SBI board has given in-principle approval of exploring the possibility of picking up a stake of up to 49 per cent in Yes Bank. However, the deal is not finalised yet.

To protect the depositors, the bank must be quickly reconstructed. Also, steps should be taken to liquidate the NPAs. If Yes Bank is resolved effectively, it will protect Yes Bank’s depositors, and maintain trust in the entire banking system.

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About Alex Andrews George

Alex Andrews George is a mentor, author, and social entrepreneur. Alex is the founder of ClearIAS and one of the expert Civil Service Exam Trainers in India.

He is the author of many best-seller books like 'Important Judgments that transformed India' and 'Important Acts that transformed India'.

A trusted mentor and pioneer in online training , Alex's guidance, strategies, study-materials, and mock-exams have helped many aspirants to become IAS, IPS, and IFS officers.

Reader Interactions

March 9, 2020 at 10:16 pm

perfect analysis and good thread thanks for posting clearias team Please do more like this analysis in economy and current affairs

October 6, 2020 at 6:57 pm

It’s one of the best analysis i have ever gone through, thanks for posting such a fruitful informative peace about the Yes Bank crisis.

November 10, 2020 at 11:39 am

One of the Best analysis 🙂👌

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Yes Bank Limited: Too Big to Fail?

By: J Ramachandran, Savithran Ramesh

The case tracks the rapid evolution of Yes Bank from a new private sector bank in 2003, to being regarded as a highly successful mid-size bank a decade later, to finally going through significant…

• Length: 26 page(s)
• Publication Date: Sep 15, 2020
• Discipline: Strategy
• Product #: IMB837-PDF-ENG

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The case tracks the rapid evolution of Yes Bank from a new private sector bank in 2003, to being regarded as a highly successful mid-size bank a decade later, to finally going through significant governance challenges that eventually led to burgeoning non-performing assets (NPAs) and a potential collapse necessitating a rescue by the government. It also briefly discusses the details of the bailout plan to rescue the bank. The case is useful for a discussion on the choices made by the founder of the bank over the years which led to phenomenal growth but may have also led to its eventual collapse. This allows for a discussion on the role of various corporate governance mechanisms that operate in an organization (such as the board of directors, legal rights of shareholders, auditors, external observers, and regulators), and the extent to which each mechanism can satisfy the commonly expected governance objectives. The case also presents an opportunity to debate the justifications for a regulator, especially when they potentially limit the rights of shareholders in an organization.

Learning Objectives

The case is apt for a course on Corporate Governance or a module on corporate governance in a course on Strategic Leadership or in a course focused on Leading Banks. The case is ideal for an in-depth engagement with the critical monitoring role of the board and the regulator in the context of a bank. It also enables a meaningful discussion on the rights of shareholders in the context of a bank. When used in a course on Corporate Governance, this case is best used along with the companion cases - Infosys Limited: Governance Imbroglio (https://hbsp.harvard.edu/product/IMB805-PDF-ENG) and Mindtree Limited: Hostile Acquisition (https://hbsp.harvard.edu/product/IMB826-PDF-ENG). While the other two cases help discuss two important tasks of the board - mentoring the leadership and maintaining continuity - respectively, this case helps focus the attention of the class on the third and what many consider to be primary task of the board, viz., monitoring the executive leadership.

Sep 15, 2020

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Indian Institute of Management-Bangalore

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Leadership and Organizational Crisis at Yes Bank

• By: D. N. Venkatesh & Samanth Bandaru
• Publisher: SAGE Publications: SAGE Business Cases Originals
• Publication year: 2022
• Online pub date: January 03, 2022
• Discipline: Leadership , Leadership Styles
• DOI: https:// doi. org/10.4135/9781529798104
• Keywords: balance sheets , banks , business strategy , crisis , customers , India , organizations , private banks , private sector , the crisis Show all Show less
• Contains: Teaching Notes Length: 5,239 words Region: Southern Asia Country: India Industry: Financial and insurance activities | Financial service activities, except insurance and pension funding Type: Indirect case info Organization: Yes Bank Organization Size: Large info Online ISBN: 9781529798104 Copyright: © D. N. Venkatesh and Samanth Bandaru 2022 More information Less information

Teaching Notes

The case deals with the governance crisis created in Yes Bank, the fourth-largest private sector bank in India. The crisis in the bank became clear after the Reserve Bank of India (RBI) imposed a moratorium on its operations. This led to concern and fear for millions of customers of the bank. The RBI was criticized for its regulatory failure to anticipate or even predict the crisis brewing in the bank during its annual audit process. The government of India was also criticized for inaction, leading to a trust deficit in Indian banking both within the country and abroad. This case examines the role played by CEO Rana Kapoor in the crisis that occurred in the bank.

Learning Outcomes

After reading the case, students will be able to:

• Describe the role of a CEO in building and nurturing sustained performance in a bank.
• Discuss the role of a CEO in creating organizational structure and process that enables sustained performance in a bank.
• Illustrate issues that arise if the CEO fails to lead the organization ethically and in compliance with regulatory norms.

Background of Yes Bank

Yes Bank, one of the leading private sector banks in India, was founded by Rana Kapoor and his brother-in-law Ashok Kapur in 2004. Rana Kapoor completed a BA at Shriram College of Commerce in Delhi, followed by an MBA at Rutgers University in New Jersey. He then worked at Bank of America for 16 years, first as a management trainee, then moving up the ranks to head the Corporate and Institutional Banking divisions of the bank. In 1996, he joined ANZ Grindlays Investment Bank as Country Head and General Manager and held that position for two years. In 2003, when the Reserve Bank of India (RBI) approved banking licences for co-owners, he teamed up with Ashok Kapur and Harkirat Singh to start Yes Bank. Their vision was, with the guidance of a strategic plan, to set Yes Bank on the road to success by adhering to the motto, ‘Building the best quality bank of the world in India’, and to accomplish that vision by 2015. During 2010, Yes Bank received 91 branch licences from RBI. The bank had established aggressive plans to increase the number of branches to 250 by 2011.

Rana Kapoor unveiled the plan for next-level growth of the bank during 2010 with specific targets to be achieved by 2015, including achieving balance sheet size of USD 15 billion with a network of 750 branches and 12,000 employees. The bank decided to balance its retail and corporate business operations. The thrust areas in retail banking included secured and unsecured business loans, working capital finance apart from trade finance, cash management services, and commercial vehicle finance. The strategic goal of the bank was aimed at having a stable balance sheet. For that purpose, Rana Kapoor sought to increase the current and savings accounts as a percentage of total deposits, rising from 9% in 2010 to 20% by 2012 and scaling up to 35% by 2015.

In order to realize its vision, the bank created a variety of products aimed at both wholesale and retail customers. Wholesale customers are offered bundled banking products and services such as Yes First Business and Yes Prosperity Business. The bank has invested heavily in technology to provide tech-driven and modern services to both retail and corporate customers.

Business Strategy of Yes Bank

The bank adopted an innovative business strategy to differentiate itself from the competition in the marketplace, using design-driven innovation frameworks to structure its operations and teams. During 2015, it created a commercial business banking division to service mid-sized corporate borrowers with revenues in the range of INR 100–500 crore. This division is in addition to the rural banking, branch banking, business banking (small enterprises), and retail segments. A restructuring exercise was undertaken of the three focus areas that are the pillars of the bank’s business strategy: (1) expanded sales distribution network; (2) enhanced product offerings coupled with customer engagement with end users; and (3) customer service and operations.

The goal of the first focus area was to expand the network to 1,500 branches by 31 March 2018, which would help the bank access low-cost current and savings deposits. Another reason for branch expansion is to push the inclusive banking targets. The bank had set up a dedicated rural and inclusive branch channel to extend banking services to targeted customer segments, such as farmer finance, tractor equipment finance, micro enterprises, and women self-help groups, for the purpose of generating micro-liabilities. To lead the team and steer the efforts in that direction, a senior president was recruited and assigned responsibilities.

The second focus area for the bank was improved product offerings and customer engagement with end users. The strategy of the bank was to leverage technology for capturing customer feedback and use the same approach in product innovation and service design. This was done in response to changed customer needs and preferences. The advent of technology made it possible for the bank to use artificial intelligence and techniques of analytics to carefully investigate and identify customer needs that may arise or have not as yet been met. The information learned from this analysis was used to design products and services for customers, including credit cards, personal loans, and savings products such as investment advisory.

The third focus area for the bank was customer service and operations. The competitive environment in the Indian banking sector forced banks to focus on service quality and not just product and service design. To align to market trends, Yes Bank created a unit termed Yes Service Organization, headed by a senior president. The responsibilities of the leader included overseeing service delivery quality across branches, alternate channels, and the contact centre. The other senior president was to head the liability and retail asset operations, city processing centres, currency chest operations, and operational excellence team for all retail operations across the country.

Technology Strategy and Architecture

The bank created a comprehensive strategy to anchor the digital transformation so as to take advantage of technology that was put in place to support business growth and company performance. The technology strategy had three components. The first component was aligning technology applications to business processes such as core banking solutions. The second component involved creation of a digital road map and executing it to use digital platforms for providing superior banking services to customers. The bank deployed digital technologies using the approach of ‘future now’, which was not limited to the rhetoric of customer centricity. The service delivery processes for digital platforms was designed after mapping and analysing the entire customer life cycle and journey in the relationship with the bank. In the process, the bank re-engineered its products and services by reimagining the customer experience in the digital banking era. The guiding principle of the bank with regard to its digital banking was alliances and relationships with underlying technology. The bank had identified its technology partners and forged alliances, keeping in view the emerging digital technologies impacting banking in India. In contrast to existing Indian banking practices whereby customers use a mix of physical, semi-digital, and digital technologies, the bank designed procedures to transform practices to completely digital banking. This project was termed the ‘Unified Digital Experience’. It aimed to seamlessly integrate Internet, mobile, and voice banking with the support of a chatbot, to help customers avail customer service around the clock.

The digital applications designed and launched by the bank include mobile banking and payment apps, while other roll-outs include digital wallets and dedicated mobile apps for specific customer segments such as small and medium enterprises. For providing superior customer service to customers in a cost-effective and predictable manner, the bank deployed chatbots, which were integrated with the customer servicing staff such as relationship managers in cross-selling and upselling of products. Thus, the bank took advantage of technology to improve its production, increase revenue, and reduce payback periods.

Yes Bank was the first bank in India to implement innovation in supply chain financing using blockchain and application programming interface banking. In 2017, the bank led the innovation in the fintech space with a focused start-up accelerator program called Yes Fintech. Through this program, the bank anchored the process of seeding and scaling up several technologies that offered a multiplier effect to its business and entire fintech system.

The third aspect of the strategy was robust, flexible, cost-optimized data management, including the creation and maintenance of technology assets such as data centres to supply tech support for the bank to scale up and at the same time provide uninterrupted data backup and data access for the business of the bank. The strategy included creation of one very large data centre to host the tier 1 and tier 2 applications of the bank, along with two large data centres in two other cities. The large data centres were designed to function as data bunkers for tier 1 and tier 2 applications of the bank. As a part of the Business Continuity Plan and Disaster Recovery Plan, the bank integrated its data centres with Microsoft’s Azure Cloud. The bank was in alignment with emergent technologies by using Azure Cloud for business intelligence purposes. It integrated Cloudera’s Hadoop data warehouse with its business intelligence applications. Hadoop also helped the bank to tokenize customer identifiable information from a data storage and access perspective. The bank used a cloud platform for various banking-related business processes such as corporate loan origination and customer periodical bank statement generation. It adopted the cloud for its mutual fund business by integrating it with Bloomberg’s market cloud for feeds and trading purposes.

Growth and Financial Performance

Yes Bank made the decision to grow aggressively to meet its strategic goals. The bank doubled its critical business performance indicators such as deposits and advances. In order to out-perform the competition, the bank ensured that it offered higher rates on deposits from individual and corporate customers. This led to increases in the cost of funds, which it aimed to offset by trying to obtain additional current savings deposits. In order to realise its growth targets on the advances, Yes Bank took the risky approach of being available as a ‘lender of the last resort’. From a strategy perspective, the bank started looking at lending opportunities to customers with a risky profile, who were unlikely to receive loans from other banks. Through this strategy, the bank has realized its growth targets. However, this approach has created potential future problems if these loans become delinquent. The various financial performance indicators of Yes Bank during the period March 2015 to March 2019 are presented in Table 1 .

Source : https://www.moneycontrol.com/financials/yesbank/balance-sheet/yb

Issues Faced by Yes Bank

The board of Yes Bank requested in August 2018 that the regulator extend the term of Rana Kapoor as managing director and chief executive officer for three years, to August 2021. However, the request was not accepted by the regulator due to the governance issues related to credit, such as lending to high-risk borrowers and under-reporting of non-performing assets (NPAs). The regulator indicated a host of issues that are creating a sense of discomfort. The key issues included:

• 1. Deteriorating financial position: The bank’s financial position had shown marked decline in recent years, due to increase in NPAs, which had adversely impacted its ability to undertake fresh lending. It had been unable to raise fresh capital to offset the declared NPAs and related potential losses. It was indicated that these shortcomings were due to external economic trends in the country and to issues with specific borrowers of the bank. This situation raised the possibility of bond investors invoking the bond covenants, which could trigger simultaneous withdrawal of depositors’ funds. The bank reported losses and its profits were reduced during four consecutive quarters.
• 2. Governance issues: The credit assessment and lending process in the bank have been focused on aggressive growth with a risk appetite. The credit assessment team were used to functioning in accordance with directives from the top leadership. At the same time, the board, which is supposed to be the custodian of the interests of stakeholders, remained a spectator as the bank continued on the risky path of lending to borrowers with high-risk ratings. Furthermore, the board kept silent when the bank under-reported the non-performing assets to the extent of INR 3,277 crore during the financial year 2018–19. The regulator had immediately appointed its former deputy governor to the board of the bank, to have oversight of the governance of the bank.
• 3. False assurance on the capital infusion: The bank leadership assured the regulator and the stakeholders on a regular basis of its efforts to identify and bring on board new investors who could infuse capital, strengthen the balance sheet of the bank, and provide it with the required liquidity. Some of the private equity firms which the bank had approached had discussions with the officials of the regulator as well. This was undertaken because statutory approval was needed to acquire a substantial stake in the bank. However, the private equity players eventually did not come forward to invest. Eventually, the regulator and the stakeholders grew restless and it was felt that the bank was only buying time and was unlikely to get any investors to infuse capital.
• 4. Unlikely market-led revival: The regulator hoped that the bank could leverage support from the market, for infusing the equity and bounce back. Unfortunately, this did not happen. In addition, the bank faced constant outflow of liquidity, as the depositors regularly withdrew deposits, due to loss of confidence. This compounded the issue and created a concern and the need for urgent intervention by the regulator to save the bank.

The regulator made the adverse observations about the leadership of Rana Kapoor:

The financial position of Yes Bank Ltd. (the bank) has undergone a steady decline largely due to inability of the bank to raise capital to address potential loan losses and resultant downgrades, triggering invocation of bond covenants by investors, and withdrawal of deposits. The bank has also experienced serious governance issues and practices in the recent years which have led to steady decline of the bank. (Rajesh & Nair, 2020)

Based on the observations from the regulator, the board of Yes Bank recommended to claw back bonuses paid to Kapoor up to the year end March 2016. The board further recommended that no bonus be paid to Kapoor for the financial years 2016–17 and 2017–18. It also recommended not raising his salary for the financial year 2017–18. The board appointed Korn & Ferry as search consultants and two external experts as members of the search committee to identify a replacement for Kapoor. Prior to this development Kapoor had discussion with Ms Madhu Kapur to pool up the individual promoter stakes that would allow him or one of his affiliates to continue as a member of the board, even after he demits the office.

The search committee selected Ravneet Gill, a career banker with three decades of experience with Deutsche Bank. Gill joined on 1 March 2020 and brought in fresh hopes for the bank and its stakeholders. The regulator was confident that Gill would deliver transparency in the financials of the bank by cleaning up the balance sheet. The bank reported mixed performance for the fourth quarter of FY 19. The advances grew by 19%, with specific contribution from retail advances (16.7% growth vs 12.2% during previous year). The current and savings account balance constituted 33.1% of total deposits. The gross NPAs of the bank stood at a mere 3.22%. The bank made higher provisions of INR 2,100 crore resulting in net loss of INR 1,507 crore for the fourth quarter of FY 19.

Thanks to the business model adopted by Rana Kapoor of having higher orientation towards corporate advances with very high risk, the percentage of corporate advances as a proportion of the bank’s advances constituted a whopping 66%. The major portion of the advances were made to high-risk sectors such as non-banking financial companies (NBFC) and real estate and housing finance companies. Ravneet Gill took measures to improve asset quality by declaring a sum of INR 31,000 crore to be advanced to sub-investment grade or BB grade loans. The bank has lent advances to organizations which declared themselves sick, including Dewan Housing Finance Company (DHFL, INR 3,700 crore), Jet Airways (INR 550 crore), Cox & Kings (INR 2,285 crore), Café Coffee Day (INR 500 crore), and Altico (INR 450 crore). Each of these loans had issues and linkages to illegal lending practices. The amount lent to Café Coffee Day was dressed up as priority sector lending, as the same was advanced towards coffee estates owned by Café Coffee Day’s owner. The advances to DHFL were a quid pro quo for the INR 600 crore investments made by DHFL in the companies owned by daughters of Rana Kapoor. Most of these loans were advanced by the bank post-2008 recession when the Indian economy was going through a downturn. The other banks had refused or resisted advancing loans to these organizations. Rana Kapoor got in touch directly with the promoters and went ahead with decisions to lend to them, without looking for a consortium of banks to offer joint support to the troubled organizations. This led to a situation where the bank’s NPAs piled up continuously.

Ravneet Gill could not get investors on board to raise the capital for the bank and keep it afloat. Things got worse when Uttam Agarwal, one of the independent directors of the bank and head of the internal audit committee, communicated with the market regulator (SEBI) to raise issues of corporate governance. He alleged that Gill was not transparent in updating the board on the progress regarding on-boarding of investors to raise funds to comply with capital adequacy requirements.

Gill shared the update on the bank’s efforts to on-board investors for infusing fresh equity. The regulator kept a close tab on these developments. Gill indicated that he would soon get investors with USD 2 billion investments and explained that he was in touch with large private equity funds in Europe. The list of potential investors included Citax Holdings with a commitment of USD 500 million, SPGP Holdings, and Canada’s Erwin Singh Braich, who committed USD 1.2 billion. The market analysts were unhappy with these investors, however, due to their poor credentials.

Reserve Bank of India and Interventions

As time passed, the regulator realized that there was no possibility of any investors committing to investments. The market and the regulator felt that both Gill and the bank’s board were only dragging out the situation. At this point the regulator decided to take action and issued a terse statement that ‘In the absence of a credible revival plan, and in public interest and the interest of the bank’s depositors, [it had] no alternative, but to impose a moratorium on bank’s operations’ (Economic Times, 2020). It appointed Prashant Kumar, erstwhile CFO of the State Bank of India, and imposed a moratorium on transactions of Yes Bank effective from 6 March to 4 April 2020. This caused an uproar, especially among depositors fearing for the safety of their deposits. The Finance Minister of India, Ms Nirmala Sitharaman, had to step in to assuage the concerns of the depositors and investors. She indicated that the regulator was working on a resolution plan to take care of the interests of all stakeholders, including the depositors.

The regulator acted swiftly and announced a draft revival plan for Yes Bank, with the State Bank of India infusing capital of INR 2,450 crore and acquiring a 49% stake in the bank. The State Bank was not allowed to lower its stake to less than 26% before the three-year time frame. The State Bank appointed two directors as its nominees of the bank and directors appointed by the regulator as its representatives on the board. There was lot of flak both from the market initially that both the regulator and government were using public money to keep a failing bank afloat. The strategic reason for the regulator and the government to bring the State Bank on board was to infuse confidence among potential investors to infuse more capital and make the revival plan more robust.

After week, the regulator has announced that the retail customers could withdraw up to an amount of INR 50,000 for personal reasons/exigencies such as medical, marriage and similar other reasons through the ATMS. Simultaneously it was announced that the State Bank of India would pick up strategic stake in the bank. Both the measures brought in confidence among the depositors and market. The share price of Yes Bank bounced from its historic lows, while SBI shares had tanked for some time with the market feeling that the bank has taking a huge investment risk.

After the State Bank pledged its support, other leading private sector banks announced their support for the revival plan of Yes Bank. The approved revival plan led to the State Bank infusing INR 7,250 crore, HDFC Bank and ICICI Bank infusing INR 1,000 crore each. Axis Bank and Kotak bank joined in the efforts by investing INR 600 crore and INR 500 crore respectively. The participation of the State Bank, India’s leading bank, along with four other leading private sector banks, sent strong signals to the depositors and other stakeholders in the market. The investors who shunned Yes Bank shares like junk papers returned to acquire them back, as they saw that the bank has potential in the new scheme of things and can continue to be a key player in the Indian banking sector.

Impact and Insights

The Yes Bank case foregrounds a couple of issues that call for the attention of researchers in the space of leadership and organization. The bank had started well under a charismatic leader with factors such as innovative business strategy and technology architecture and had the right pedigree to become a global bank. It caught the attention of all stakeholders and became one of the best banks in the country. A responsible and charismatic leader will invest energies in building a robust system that can anchor the sustained growth and performance of the organization. In the case of Yes Bank, the chief executive looked for quick growth by adopting a risky business strategy. He used his power and charisma to silence the board of directors and other leaders in the organization, as well as mixing personal business with his interests as CEO of a publicly listed bank. The quid pro quo arrangement that he and his family had with some of the vendors to pursue their personal interests is not in conformity with the behaviour of a responsible leader.

According to theoretical framework, charismatic leaders tend to have powerful and positive influence on an organization. Typically, charismatic leaders inspire and motivate their followers and win their loyalty by creating a climate of being heard and understood. However, the flip side is that such leaders can leverage the charisma to realize their personal goals and, in the process, compromise organizational goals or common good. In the case of Yes Bank, the CEO has used his charisma to build a powerful brand equity for the organization. At the same time, he has leveraged this brand equity for his personal gain, to the organization’s cost. He has used his charisma to sabotage processes in the bank and get away with it for a long time. This has created a serious problem for the bank that almost became an existential crisis. But for the intervention and involvement of the regulator, the bank would have become bankrupt.

There are issues with leading and controlling the corporate lending of a bank by one individual through his personal relationships, as this weakens the bank’s credit assessment capability. As the organization grows, the respective functionaries should be given the space and freedom to operate and deliver. This will help in building a sustainable and stable organization. The role of a leader is to loosen control and give space for other leaders to operate, which allows the bank to leverage the knowledge and skills of the leadership team. There are issues relating to integrity as well. The reports of Kapoor and his daughters getting involved in back-to-back deals with some corporate loan borrowers that have eventually become delinquent indicate that trust and integrity – which are fundamental for a financial institution like a bank – have been compromised. Furthermore, there are issues around corporate governance. The very fact that the bank has window-dressed its balance sheet by under-reporting its NPAs during the financial year 2018–19 indicates that governance has been compromised. Functionaries ranging from internal and external auditors to the audit committee of the bank’s board have not discharged their responsibilities diligently.

In essence, to sum up, the Yes Bank episode is a classic case of a leader who creates a vibrant institution, nurtures it successfully and yet throttles it due to his greed to milk personal gains from the institution. It is always important to draw a line and differentiate between the leader and the institution; when the line becomes blurred, it can lead to an existential crisis for the organization, which, if not handled well, could result in its demise.

Discussion Questions

• 1. Analyse the leadership style of the CEO of Yes Bank.
• 2. What kind of impact did the CEO have on the bank?
• 3. How can an organization avoid the negative impact of leadership?

Further Reading

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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Explained: How Yes Bank ran into crisis

How did yes bank go from being one of the buzziest banks to among the most stressed to which sectors was it lending why have the rbi’s decisions triggered concern among depositors and bond owners.

On March 5, the Reserve Bank of India announced that it was superseding the Yes Bank Board of Directors for a period of 30 days “owing to serious deterioration in the financial position of the Bank”. But what created panic among the general public, and in particular the deposit holders in Yes Bank, was the RBI’s decision to cap withdrawals at Rs 50,000 . The RBI said it had “no alternative but to” place the Bank under moratorium “in the absence of a credible revival plan, and in public interest and the interest of the bank’s depositors…”

Between 2004, when it was launched, and 2015, Yes Bank was one of the buzziest banks. In 2015, UBS, a global financial services company, raised the first red flag about its asset quality. The UBS report stated that Yes Bank had loaned more than its net worth to companies that were unlikely to pay back. However, Yes Bank continued to extend loans to several big firms and became the fifth-largest private sector lender (see Chart 1).

But, the type of firms and sectors to which Yes Bank was lending resulted in the start of the crisis. According to one estimate, as much as 25% of all Yes Bank loans were extended to Non-Banking Financial Companies, real estate firms, and the construction sector. These were the three sectors of the Indian economy that have struggled the most over the past few years. As Charts 2 and 3 show, Yes Bank was overexposed to these toxic assets. It was only a matter of time that non-performing assets (NPAs) started rising in Yes Bank.

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Still, as Chart 4 shows, Yes Bank’s NPAs were not as alarmingly high as some of the other banks in the country. But what made it more susceptible to bankruptcy was its inability to honestly recognise its NPAs — on three different occasions, the last being in November 2019, the RBI pulled it up for under-reporting NPAs — and adequately provide for such bad loans. Chart 5 shows how Yes Bank fared poorly on provision coverage ratio, which essentially maps the ability of a bank to deal with NPAs.

While debtors failing to pay back was the central problem, what further compounded Yes Bank’s financial problems was the reaction of its depositors. As Yes Bank faltered on NPAs, its share price went down and public confidence in it fell. This reflected not only in depositors shying away from opening fresh accounts but also in massive withdrawals by existing depositors, who pulled out over Rs 18,000 crore between April and September last year. It is estimated that up to 20% more withdrawals could have happened between October and February.

So essentially, Yes Bank lost out on capital (money) from both depositors and debtors.

Will Yes Bank’s fall affect other private sector banks?

The banking system runs on trust. The Yes Bank episode could likely push depositors away from private sector banks. An analysis by AnandRathi Equities tries to evaluate the contagion impact on other private banks.

It states: “With these developments, we expect deposit growth for select private banks to slow, leading to lower credit growth”. The table above shows the calculated risk-based scores of 11 private banks.

Read | Yes Bank founder Rana Kapoor sent to ED custody, daughter stopped from taking flight to UK

What is RBI’s solution to Yes Bank’s revival; why has it triggered a controversy?

On March 6, the RBI released its “draft” revival plan for Yes Bank. Accordingly, State Bank of India could pick up 49% stake, and hold on to at least 26% for the next three years.

While this issue is still to be settled, another decision by the RBI created consternation among investors of Yes Bank.

The RBI stated that the so-called Additional Tier 1 (or AT1) capital that was raised by Yes Bank would be completely written off. In other words, those who lent money to Yes Bank under the AT1 category of bonds would lose all their money.

Also read | As crisis loomed over Yes Bank, in six months, depositors took out Rs 18,000 crore

As much as Rs 10,800 crore fall under this category, and many popular mutual funds like Franklin Templeton, UTI Mutual Fund, SBI Pension Fund Trust, etc. stand to lose out. Indirectly, a lot of common investors too will lose out on their investments.

Yes Bank crisis: What is AT1 capital?

In a bank, there are different tiers (hierarchies) of capital (money). The top tier or T1 has the “equity” capital — that is, money put in by the owners and shareholders. It is the riskiest category of capital. Then there are different types of bonds (such as AT1 and AT2), which a bank floats to raise money from the market. Last is the depositor — the one who parks her money in the bank’s savings account.

The depositor’s money is the safest type of capital. When something goes wrong, the depositor is paid back first and the equity owner the last. When the going is good, the depositor earns the lowest reward (rate of return) while the equity owners earn the most profits.

What has created a problem is that RBI has said that capital raised via AT1 bonds, which is in the same tier of capital as equity (i.e., Tier 1), will be written off even though equity will not be.

Read | Yes Bank bad loans: 44 companies from 10 big groups account for Rs 34,000-crore

Bond owners, that is the mutual funds who loaned the money to Yes Bank, argue that they are being unfairly written off. They argue that equity capital should be written off before AT1. But the RBI has thrown the rule book at them. In all likelihood, this matter will be only be decided in court.

Udit Misra is Deputy Associate Editor. Follow him on Twitter @ieuditmisra ... Read More

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Rs 5,000-Crore Fraud By Yes Bank's Rana Kapoor, Wadhawans: Probe Agency

This is the second supplementary chargesheet filed recently against rana kapoor, his family, wadhawans and others in a money laundering case..

Rana Kapoor is currently in judicial custody

The Enforcement Directorate (ED) has alleged that Yes Bank co-founder Rana Kapoor and Dewan Housing Finance Limited (DHFL) promoters Kapil and Dheeraj Wadhawan siphoned off funds worth Rs 5,050 crore through suspicious transactions. The ED said this in its second supplementary (third overall) chargesheet filed in a special court here recently against Rana Kapoor, his family, Wadhawans and others in a money laundering case.

During the investigation, it came to light that a big part of the proceeds of crime (POC) generated in this case has been siphoned off overseas by Rana Kapoor and hence they are not available for attachment directly under the provisions of Prevention of Money Laundering Act (PMLA), it said.

"Rana Kapoor, DHFL promoters Kapil Wadhawan, Dheeraj Wadhawan and others were involved in criminal conspiracy with each other in illegal diversion and siphoning off of funds through suspicious transaction of Rs 5,050 crore," the central probe agency claimed in its fresh prosecution complaint (charge sheet) filed recently.

The ED said investigation has revealed that Yes Bank had bought debentures worth Rs 3,700 crore between April 2018 and June 2018 from DHFL. Therefore, the amount was transferred to DHFL. Subsequently, DHFL gave a loan of Rs 600 crore to DOIT Urban Ventures Pvt Ltd (an entity, beneficially owned by Rana Kapoor and his family).

The probe also revealed that Yes Bank had used public money for the purchase of the above-said short-term debentures of DHFL, which has not yet been redeemed by DHFL.

On the other hand, DHFL obliged Rana Kapoor by giving the so-called loan of Rs 600 crore to his beneficially-owned company, namely DUVPL, without adequate collateral, the agency said.

It claimed that the loans given to the firm owned by Kapoor's family were to camouflage the entire act.

The investigation has revealed that a loan of Rs 600 crore was given against substandard properties having a meager value of Rs 39.68 crore and by considering further conversion from agriculture land to residential land and an inflated value of Rs 735 crore was shown, it added.

It has also come to light that just before the sanction of these loans, Yes Bank had invested in DHFL. This indicates a criminal conspiracy between Rana Kapoor and Kapil and Dheeraj Wadhawan to get loan by pledging highly overvalued assets, the charge-sheet said, adding there was no active or operating business in DUVPL at the time of proposal of loan.

Since DUVPL has no business activity and as such not generating any revenue as of today and it may not be able to repay the loan considering its present business activity and revenue. This clearly indicates a case of quid pro quo, it said.

Besides, Yes Bank had also sanctioned a loan of Rs 750 crore to one M/s Belief Realtors Private Limited (beneficially owned by Wadhawans) for development of its Bandra Reclamation Project in Mumbai. Investigation has revealed that the entire amount was siphoned off by the Wadhawans without spending a single penny for the declared purpose, the ED added.

The entire amount of loan disbursed to M/s Belief Realtors was siphoned off by the Wadhawans by way of layering through their shell companies and it was never used for the declared purpose, the charge sheet said.

"There is no doubt about the fact that Rana Kapoor has misused his official position to gain undue financial benefit for him and his family members," it said.

The investigation has revealed that the POC generated in this case has been layered in different forms in properties as well as in liquid form. It has also been revealed during the investigation that a big part of the POC generated in this case has been siphoned off overseas by Rana Kapoor.The proceeds of crime are thus, not available for attachment directly, the ED said.

The ED had started its investigation after recording of ECIR on March 3, 2020 and after the probe began, Rana Kapoor aggressively tried to dispose of his overseas properties to save them from being attached by the ED under PMLA, the charge sheet said.

The POC involved in this case is Rs 5,050 crore.While Rana Kapoor is the founder of the said company namely DUVPL, his three daughters are 100 per cent shareholders therein.

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Rana Kapoor is currently in judicial custody following his arrest in the case in March 2020. Wadhwans too are in jail custody after their arrest in another case.

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How Yes Bank bounced back from near collapse four years ago 

First and foremost, the lender raised capital worth rs 24,000 crore, which helped it make provisions for npas and grow the balance sheet in retail and msme areas.

• Updated Jan 29, 2024, 4:20 PM IST

When the Reserve Bank of India (RBI) clamped down on Yes Bank four years ago, the new-generation private lender was on the verge of collapse. The liquidity coverage ratio (LCR), which measures the level of liquid assets to meet immediate short-term repayments, was at a rock-bottom 37% of total cash outflow over the next 30 days. The gross non-performing assets (NPAs) had spiked to 16.8%, a level usually associated with public sector banks. The return on assets plunged to 7.1%. Clearly, the bank was about to go bust, as the run on deposits had started. But, the government and the RBI stepped in to save the bank.

Enter the country’s largest bank, the State Bank of India (SBI), as the majority shareholder, placing its former deputy managing director Prashant Kumar and RBI’s former Deputy Governor R. Gandhi to manage the ship. The bank is now getting back into shape. Let’s look at the December quarter ratios for comparison.

The LCR improved to 118% in December 2023. Gross NPAs have improved from 16.8% to 2%, a significant achievement given the high bad loan portfolio of the bank. Similarly, the return on assets (RoA) has improved from negative to 0.3%.

So, what has the bank done in the last four years that has led to this turnaround?

First, the bank went all out to raise capital worth Rs 24,000 crore, helping it make provisions for NPAs and grow the balance sheet in retail and MSME areas. Apart from SBI, there are two marquee private equity players - Carlyle and Advent International.

Second, the entry of SBI and other private banks as equity contributors brought back trust in the brand. This is evident from the high deposit base. When the moratorium was imposed, the deposit base crashed to Rs 1 lakh crore in March 2020. The deposits now stand at Rs 2.41 lakh crore. In a banking entity, low-cost deposits, especially savings and current accounts, are the fodder for competing in the assets space, especially home loans, personal loans, and the MSME segment. The higher the low-cost CASA, the better the margins.

Third, the share of retail and SME advances, perceived as safer compared to large corporate loans, has increased significantly in the last four years. This share has risen from 36.3 percent at the time of the moratorium to a high of 62.6 percent in December 2023.

Last but not least, the brand Yes Bank has a new identity and a complete new team with a strong compliance culture.

While releasing the third quarter results, Prashant Kumar, Managing Director & CEO, YES BANK explained that the bank , over the last few quarters , have remained focused on executing our profitability improvement roadmap by leveraging our core and key business levers of retail asset mix optimisation, SME and Mid-Market strong value proposition, fully exploiting branch network , and leveraging digital and transaction banking capabilities and partnerships.

However, there are also challenges as new private banks and PSBs are aggressively tapping into the retail and MSME segments with digital offerings. The RBI is also very closely monitoring the banks' unsecured portfolio. In addition, the entry of large corporate-backed NBFCs like Jio Financial, Piramal Finance, Godrej Capital, and Poonawalla has intensified the competition in the retail as well as the MSME segment.

Also Read:  BYJU’S to raise $200 mn from existing investors through rights issue

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YES Bank fiasco: a corporate governance failure

• Perspective Article
• Published: 27 April 2021
• Volume 48 , pages 181–190, ( 2021 )

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• Rajat Deb   ORCID: orcid.org/0000-0002-7009-0051 1  

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Financial market has been jolted on 5 March 2020 when the central government has put YES Bank Ltd., India’s fourth largest private bank, under moratorium, and the RBI has come out with a bailout package. The former CEO had extended loans in quid pro quo non-arrangement to the companies confronting financial turmoil. Theoretically, independent directors supposed to bring independent judgement about strategy and risk management which, for the bank, has been miserably failed and has extended loans without considering the borrowers’ ability of repayment. The audit committee has too failed to show its acumen and approved the management’s proposals.

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Deb, R. YES Bank fiasco: a corporate governance failure. Decision 48 , 181–190 (2021). https://doi.org/10.1007/s40622-021-00277-7

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Accepted : 30 March 2021

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DOI : https://doi.org/10.1007/s40622-021-00277-7

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Fundamental Analysis of Yes Bank – Financials, Future Plans & More

by Vikalp Mishra | Feb 6, 2023 | Case Study , Financials | 21 comments

Fundamental Analysis of Yes Bank: The second half of the calendar year 2022 was about banking PSUs giving multi-bagger returns to their shareholders. The rally was led by improvements in asset quality and record growth in advances. But there is another bank, although not the government, that has come out of recovery.

The infamous Yes Bank. In this article, we’ll perform a Fundamental analysis of Yes Bank to know where it stands today, its future prospects, and more.

Fundamental Analysis of Yes Bank

To understand what are the future prospects of Yes Bank and whether it is on the path to recovery, it is imperative to understand what happened under Rana Kapoor’s watch. We start with a quick overview of the company. Later we learn about the fraud and the consequent bailout. Next, a few sections cover the financials of the stock. A summary concludes the article in the end. 

Company Overview

Yes Bank was founded in 2004 by Rana Kapoor and the late Ashok Kapur. Over the years, it grew to become one of the banking giants in India with its valuation crossing Rs 1.1 lakh crore at its peak.

As a full-service commercial bank, it provides a broad range of banking, asset management, and other financial services to corporate, retail, and MSME customers. Furthermore, the bank also offers investment banking, merchant banking, and brokerage services through its wholly-owned subsidiary Yes Securities.

It is presently the 7th largest private bank in India in terms of market capitalization with a value of Rs 49,000 crore.

But it is very likely you know the bank more because of its collapse and not its highs. Its reputation has been marred by the various things that happened at the company.

In the next section of our fundamental analysis, we cover what happened at Yes Bank. 

Why did Yes Bank collapse? 

The period before 2014.

The bank initially attracted deposits by paying higher interest rates. These deposits were primarily deployed for lending to corporates to obtain higher interest income. And for a long time, the bank earned stellar profits. 

As of March 2018, corporate banking constituted 67.9% of the total advances portfolio. Meanwhile, retail and MSMEs accounted for 32.1% of the advances. And these loans were made to troubled firms like DHFL, Anil Ambani-led Reliance companies, and Essel Group.

The period from 2014 to 2018

Thus, when RBI under Raghuram Rajan started cleaning up the bad loans from 2014, Yes Bank’s name came forward. And the issue was far greater than the riskier loans lent by it.

The bank was under-reporting its NPAs. The reported NPAs of Yes Bank stood at only 0.31% in 2014. The officials at the central bank disagreed.

But that’s not it. The banker was also involved in money laundering. Rana Kapoor diverted funds through corporate loans with the help of DHFL. It lent money to DHFL, which put money into the companies owned by Kapoor’s daughters. 

The year 2018

Soon, the investigation unfolded as the government & RBI realized Yes Bank’s financials were in a very dire state. The central bank declined Kapoor’s proposal to extend his tenure as CEO. He had to step down.

What followed after this was simply RBI’s efforts to avert a large financial crisis in India.

Bail Out of Yes Bank

The year 2020.

As its first step, the central bank took over the board and put a moratorium on Yes Bank in March 2020 to avoid a bank run situation. It meant the bank could not give large withdrawals, provide/renew loans, make investments, borrow money, etc.

Additionally, to save the bank and avert a liquidity crisis, RBI roped in HDFC Bank, State Bank of India, Axis Bank, and ICICI Bank. Various banks invested money in the bank with a lock-in period of 3 years on 75% of their investment. For instance, SBI invested Rs 6,050 crore picking a 48.21% stake.

This is important to note because the lock-in period for these investors is set to expire in March 2023. This is risky because when large investors sell their bulk stakes, the share price usually falls.

June-July 2020

Additionally, the new board under SBI launched an FPO in June-July, 2020 for Rs 15,000 crore for the recapitalization of the bank. Several big names participated in the capital raise including SBI itself, LIC of India, PNB, Bajaj Holdings, IIFL, and more.

The year 2022

And that’s not all. Recently in December 2022, Yes Bank further raised roughly Rs 8,900 crore from private equity giants Carlyle and Advent by selling a 9.99% stake. Thus, we can sum it up at this stage that Yes Bank seems to be adequately capitalized to expand in the coming years.

We have covered the most important section as part of our fundamental analysis of Yes Bank. In the sections ahead, we will race through the figures for the past five years. 

Yes Bank – Financials

Income & net profit growth.

The net interest income of Yes Bank has been volatile over the last five years. The bank accounted for huge provisions of Rs 28,312 crore in FY20. This resulted in a heavy loss of Rs 16,418 crore.

Overall, the table below presents the net interest income, other income, provisions & contingencies, and net profit or loss of Yes Bank for the last five years. Overall, we can see that the bank is on the path to recovery.

*The other income rose sharply in FY20 as the new management wrote off liability on AT-1 bonds as part of the restructuring process. However, recently in January 2022, the Bombay High Court rejected the write-off implying a renewed liability for the bank. RBI and the bank management may appeal to the Supreme Court against the order.

Advances & Deposits Growth

Every bank earns profit through the interest income which is the difference between the interest it:

• earns on the money it lends (advances) 
• pays to customers for their deposits (deposits)

Thus, among other things, for Yes Bank to increasing its net interest income, it has to attract more deposits and advances. The table below highlights how the two heads have increased in value in FY22 after falling off their height in FY19.

But as Raghuram G. Rajan said in his book ‘I do What I do’, “Finance is not just about lending, it is about recovering loans also.” This is where Yes Bank blundered while giving loans to risky entities. In the next section of our fundamental analysis of Yes Bank, we look at the non-performing assets (NPAs) or bad-loans situation of the bank.

NPAs & Asset Quality

The asset quality of the bank has improved considerably since FY 2020. It stood at a shocking 16.8% for GNPAs and 5.0% for NNPAs at the end of the fiscal year. Fast forward to Q3FY23, it has gotten better at 2.0% and 1.0% respectively.

The table below shows the Gross NPAs and the Net NPAs of Yes Bank for different ending periods. 

We can see the NPA figures stayed elevated in the last three fiscals. Let us see how that affected profitability as part of our fundamental analysis of Yes Bank .

Return Ratios: RoE & RoA

Return on equity (RoE) and return on assets (RoA) are two preferred ratios for assessing a bank’s profitability. We are familiar with the RoE already. RoA or return on assets is the after-tax income divided by its total assets. Since banks are overly leveraged, even an RoA greater than 1.5% is considered healthy.

The table below shows the recovery in the return ratios of Yes Bank. Take a look at how sharply the RoE fell to a negative of 81.8% in FY20 as the company provisioned a lot of bad loans.

Advances Portfolio & CASA Ratio

One thing that brought Yes Bank down was the share of the riskier corporate loans in its loan book. Corporates accounted for a total of 68% of the total advances in FY18. Since the fallout, the bank has worked towards the granularization (or diversification) of its asset book. 

After Q3FY23, the share of corporates in the loan book stood at 29% while the retail and MSME had 71% share.

The CASA ratio of the bank still needs to improve saying it has to attract more deposits from the savings account and current account holders. This is because a bank has to pay lower interest to these two customer segments as compared to the term-deposits ones.

The graph below highlights the advances breakdown and CASA ratio of Yes Bank.

Yes Bank – Future Plans & Risks

So far we only looked at the past results of the stock as part of our fundamental analysis of Yes Bank . In this section, we briefly cover what lies ahead for the stock and its investors.

Future plans

• CARE upgraded the rating of Yes Bank to A- from BBB+ earlier with a positive outlook stating that the bank has turned stable.
• Recently, the bank sold its stressed assets of Rs 48,000 crore to J.C. Flowers Asset Reconstruction (JC Flowers ARC) for a consideration of Rs 11,183 crore to clean its books. Additionally, it acquired a 9.9% minority stake in the ARC with plans to purchase a further 10% holding.
• With the capital raise and strong asset quality, the bank seems to be well positioned to capture its market share back in the coming years.
• After the recent Bombay High Court order on AT-1 bonds, there is a contingent liability on Yes Bank to the extent of Rs 8,450 crore till RBI and the bank management appeal against it in the Supreme Court.
• The lock-in period for the investors that bailed out Yes Bank is set to expire in March 2022. Usually, when large investors offload their stakes, the stock prices fall sharply.
• In the aftermath of the fallout, other banks such as IDFC First Bank quickly gained market share from Yes Bank. Furthermore, the banking industry has become very competitive over the last two years.

Yes Bank – Key Metrics

Let us take a quick look at the key metrics of the stock.

In Conclusion

We are now at the end of our fundamental analysis of Yes Bank. While the financials of the bank have definitely gotten better in the last three years, the risk still hangs with intense competition from other banks. It will be interesting to see how the bank performs under the new owners. 

Do you think it will be able to earn back its reputation and deliver good returns for the shareholders in the future? How about you tell us your opinion on the stock in the comments below?

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Vikalp Mishra is a commerce graduate from the University of Delhi. He likes to write on finance, money and business. He is a voracious reader with a genuine interest in investing. Drop him a mail at [email protected] .

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Great post. Please provide info regarding lock in period of yes bank shares. What is your review after end of lock in period phase.

Hey Amit! Thanks for your positive comment. As for the price movement, I can not offer any guidance as I’m not a SEBI-registered investment advisor. However, historically, whenever investors sell in bulk, prices fall. And recently SBI management said that they are comfortable bringing down their stake.

Definitely this will give good returns to shares this year ..

Hi Nagendra! I can neither confirm nor refute your statement as I’m not a SEBI-registered investment advisor. However, I do hope that future turns out to be better for the stocks and investors. Next 2-3 quarters will reveal a lot of things.

Thanks Vikalp your artical gave exact. True. depth knowledge which is hard to get in finance writing wether they are SEBI approved or not. Your artical is like a correct knowledge of banks position. It would hard to predict future like market become ground of players like Hindenburg, Adani. Anil Ambani and still many big fish they hold their influence on SEBI like Chanda kosher and Dhoot. Thanks for doing hard work

Thanks a lot for your kind words, Vikram! Comments like yours make my day. I feel blessed at this moment after reading your response.

Yes, that is there. All these scams end up hurting the general public and general investors the most. The best we can do is do our research and stay away from fancy things.

I would be more than happy to connect with you via my mail: [email protected]

Feel free to reach out to me for any queries or suggestions on further reading.

Slow and good wealth creation will make us financially free in the long run.

[email protected]

Hey Ajit! How may I help you?

Turn around has started and will bear returns after a few years.

It will be interesting to track the business over the next few quarters, Manas.

Nice analysis. From this it seems yes bank future is intresting for investors

Thanks for the appreciation, Deepak! It will be interesting to track how the bank performs under the new owners.

AT-1 is the main problem, SBI will not decrease there stake in a single lot. Definitely 2-3 year investment prosperous will give you a wonderful return.

Hey Santy! Thanks for your input. I genuinely love it when my readers offer their perspectives on the articles. It will be interesting to see what actually happens in March. Stay around the corner.

I do not invest in Equity and possess very little knowledge about the Market. After reading your article I think a person like me can also take a call on whether to buy or not. wonderfully articulated. Keep creating the same articles

Thanks, Amit! Your comment means a lot to me. Feel free to reach out on [email protected] for any queries or suggestions on further reading. I would be more than happy to assist you with even the smallest of doubts.

When I see Yes bank, with current shareholding I really don’t see a difference between SBI and Yes bank, at least not in the long term. Hence, I foresee both trading at similar profitability levels and consequently similar P/E and P/B levels.

Thanks a lot for your input, Vijay. I beg to differ because SBI and Yes Bank have different portfolio of their advances and present asset quality. These differences will reflect in different P/E and P/B levels over the long term.

Excellent Article. Such articles do help to the retail and other investors to a great extent.

Hi VIkalp, Very nice and insightful analysis of Yes bank’s current status and future. With CRICIL and Moody’s systematically raising the ratings of YES bank, do you think there is any risk for those who put money in the bank as fixed deposits in the medium term of 3-5 years? Your thoughts please

An exceptionally well-researched article! I could get a much better picture of the situation of Yes Bank (past and present). Do you plan to write a follow-up article? If yes, when? Thanks again.

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Yes Bank: Financial Distress

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Product Description

Publication Date: February 22, 2023

Source: Ivey Publishing

In May 2022, a young analyst intended to examine the financials of Yes Bank, one of India's leading private banks. It had gotten into financial trouble and had experienced irregularities in recent years. Crucial clients of the analyst's financial advisory firm were interested in Yes Bank's investment potential because the share price was cheap. The clients therefore wanted to know if the bank showed signs of progress and stability, as it could make an ideal investment. The analyst believed the bank would be financially stable only if it was no longer experiencing financial distress. Therefore, the analyst used the CAMELS framework and probability of financial distress model to examine the financials and advise their clients on the bank's financial position. Riyazahmed K is affiliated with SDM Institute for Management Development

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Please note you do not have access to teaching notes, yes bank: an untold story.

Publication date: 4 May 2021

Issue publication date: 4 May 2021

Teaching notes

Learning outcomes.

The learning outcomes are as follows: understand the mechanism of sourcing and allocation of funds in the Indian banking industry; compare financial indicators of Yes bank with the industry average and interpret the hidden stress; understand the role of NPAs in the banking industry and analyze Yes bank’s performance; and identify the possible red signals in the business model of Yes bank.

Case overview/synopsis

The case narrated the story of Yes bank which was considered as one of the most promising and rising banks of India. The stock of Yes bank had been the preferred investment choice for many investors because of its outstanding performance in almost all the important parameters of the industry since 2005. Since its inception, investors favored the stock with an assumption that this new generation bank had a unique as well as a sustainable banking model. However, after the year 2016, Reserve Bank of India (Indian central bank and banking regulator) found huge under-reporting of non-performing assets (NPAs) in the three (i.e. 2015–16, 2016–17 and 2018–19) out of its four annual regulatory inspections, casting doubt in the way Yes bank functioned. Risk and aggression seemed to be the two most important aspects of Yes bank’s culture and this case tried to narrate the same through various financial indicators. The ratio comparison with the industry average indicated the possible gray areas of Yes bank, which was once considered as the most promising bank of India. Unfortunately, even the change of guard at the helm of Yes bank did not change the fate of the bank.

Complexity academic level

MBA/PGDBA/Executive MBA.

Supplementary materials

Teaching Notes are available for educators only.

Subject code

CSS 1: Accounting and Finance.

• Accounting/accountancy
• Banks/banking
• Financial analysis/forecasting

Acknowledgements

Disclaimer. This case is written solely for educational purposes and is not intended to represent successful or unsuccessful managerial decision-making. The authors may have disguised names; financial and other recognizable information to protect confidentiality.

Ramchandani, K. and Jethwani, K. (2021), "Yes bank: an untold story", , Vol. 11 No. 1. https://doi.org/10.1108/EEMCS-04-2020-0123

Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

You do not currently have access to these teaching notes. Teaching notes are available for teaching faculty at subscribing institutions. Teaching notes accompany case studies with suggested learning objectives, classroom methods and potential assignment questions. They support dynamic classroom discussion to help develop student's analytical skills.

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