Yes Bank Limited has become no bank. Late Thursday evening in Mumbai, RBI placed the private-sector lender under moratorium. Depositors will only be allowed to withdraw only Rs 50,000 rupees, equivalent of less than $700 for the next six months. It was in dire need of capital because of deterioration in its asset quality, NPA provisioning, and losses in its books. At the end of second quarter of FY20, its core capital ratio plunged as the NPAs went on rising. The gross NPAs was already at 7.4 per cent in September 2019. The bank need more than Rs 10,000 crores as capital even for its survival.
Though YES Bank CEO Ravneet Gill who in collaboration with political and business leaders, played leading role in the collapse of this prominent private bank by generously allowing the corporate forces to get huge loans without any means to return them, went on saying about various plans to get this capital deficit rectified, nothing materialized.
Now, the RBI and the finance ministry are keeping the speculation over merger with SBI and LIC alive to cool down tempers among the distressed investors and depositors. But
in the recent acquisition of IDBI Bank by LIC, the insurance giant had to pump in huge money to just save it, whose gross NPAs had spiralled to over 25-26 per cent.
If capital situation at YES Bank again deteriorates, the RBI will have no other option but to take it into its fold. The framework involves monitoring the bank, put restrictions on risky lending, and nurse it back to health. Clearly, the government and the RBI don’t want another bank to fail as there would be a chain reaction. Any failure of a bank generally leads to loss of trust in the banking system. In fact, it can impact the entire private banking sector, which now has over 30 per cent market share in deposits and advances.
The Finance Minister has made a customary assurance to depositors that there will be no loss to any Yes Bank depositor. Earlier in the day, RBI Governor said the central bank has a scheme to revive the beleaguered lender. “We will take swift action... and we have a scheme in place to revive the bank.” After the RBI placed Yes Bank under the moratorium and imposed withdrawal limit, the stock price of the Mumbai-based private lender crashed 85 per cent to hit an intraday low of Rs 5.65 on the National Stock Exchange. The Yes Bank’s fall has caused acute distress to lakhs of depositors, further increasing the financial crisis.
Now, the SBI is asked to take the burden of rescuing Yes Bank. That is the enormous loot by the corporate shall become the burden of SBI’s depositors. As Modi’s economics is to surrender all sectors including banking to corporate, it is only the beginning. Many more such bank crashes shall take place if this fascist regime is thrown out. n