Statsguru: From SBI to ICICI Bank, lenders come to YES Bank’s rescue

The problem with YES Bank was not so clear until the Reserve Bank of India (RBI) refused to renew the contract with director and CEO Rana Kapoor in September 2018. Subsequently, the board of the bank hired Ravneth Gill from Deutsche Bank to replace Kapoor. However, problems started to arise when she tried to raise capital. Since March 2019, the creditor began to reduce its loan portfolio (Figure 1), but deposits remained healthy (Figure 2), as the population was confident that it would not fail despite the bank’s problems.

 

However, the bank could not sweep problematic debts under the carpet as long as the RBI auditors required all banks to disclose information about their problematic debts. The JA bank has experienced the biggest difference between private banks and, as RBI auditors warn, it started to report higher rates for bad debts as of September 2018 (Figure 3). Despite the Bank’s difficulties in raising capital, its capitalisation remained high until the December quarter data were released. We now know that the bank undervalues bad loans.

 

But after the abolition of the central bank, everything changed and the December 2019 quarter results showed the bank’s decline. The solvency ratio declined (figure 4) as the bank had to secure its huge pile of bad loans and the share price fell, causing market capitalisation to fall (figure 5), until the government and RBI decided to bail out the bank and attract other creditors, including the State Bank of India, to invest (figure 6). After the lifting of the moratorium on the 18th. SEU Bank resumed its activities as a full-service bank in March. It has sufficient liquidity to cover its deposits of Rs. 1.65 trillion. And now RBI has opened a credit line of Rs.60,000 for the bank.

StatsGuru is a weekly station. Every Monday the Business Standard will guide you through the numbers you need to know to sort the titles. The source: CapitalLine; compiled by the BS Research Bureau.

 

Statistics


Compiled by research bureau BS

Statistics


Compiled by research bureau BS

Statistics


Compiled by research bureau BS

Statistics


Compiled by research bureau BS

Statistics


Compiled by research bureau BS

Statistics


Compiled by research bureau BS

 

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