Today’s economy – Yes bank disaster

Today’s economy – Yes bank disaster

by / 0 Comments / 25 View / 12th March 2020

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Yes Bank is a large modern private bank. Since its founding by Rana Kapoor in 2008, it has been transformed into a successful industry with all the features it needs. About two years ago, it was loved by both investors and customers. Even today, the public has deposited more than Rs 200,000 crore in it. In the early years of the business, it focused on saving interest on savings bank deposits and providing personalized services to customers. So it began to fall, as the amount of bad debts in its accounts continued to rise. The bank failed to raise cash to manage its bad debt. Its current investors or other potential investors are no longer interested in investing in it. So many investors have begun to break bonds to reduce their risk of financial loss.

The bank’s efforts to create new capital failed in the middle of last year and sounded the alarm. Moody’s Investors Service, which downgraded Yes4 Bank’s credit rating in December 2017, said its performance was “questionable” due to the slowdown in new fundraising. Many domestic banks, such as Kotak Mahindra, Lakshmi Bilas and other private banks, have started offering competitive interest and services, leaving many of the bank’s customers to become customers of other banks. After the bank lost Rs 1,500 crore in the first quarter of the current fiscal, the RBI had to appoint a Man of the Match board on its board. In January 2017, Rana Kapoor was forced to step down as the bank’s managing director and chief executive because the RBI rejected the board’s recommendation to extend his tenure. Following Kapoor’s departure, the board became embroiled in controversy, with its members divided into two factions: one for Kapoor and one for the opposition. As a result, even after Ranbir Singh Gill took over as managing director and chief executive, there was a stalemate in the bank. However, the stalemate intensified last week, limiting the RBI’s withdrawal limit from the bank to a maximum of Rs 50,000 per month. As a controversial move, SBI has agreed to pay Rs 10,000 crore to the bank to save it from disaster. The RBI and SBI have announced that the money will be withdrawn within a month.

Bank failures in India are not new. There have been so many incidents in the past. A few months later, the Punjab and Maharashtra Cooperative Bank was declared bankrupt. Several years ago, the Global Trust Bank also lost customer confidence. So now the incident is important because Yes Bank is one of the largest banks in India. It is the fifth largest lending bank among private banks. The failure of Jesus Bank has cast doubt on the control of private banks and undermined public confidence in financial institutions. In our country, only state-owned banks focus on banking reform. Private banks are not properly regulated by the RBI. Jesus Bank’s corporate governance was a failure. The directors were coming and going. But the bank’s guilt remained the same. There was a severe lack of transparency. Truth and information were hidden from the directors. Even the directors did not try to verify the information provided to them. Rana Kapoor considered the bank his landlord. DHFFLL, Anil Ambani Group 4 Companies, Subhash Chandra’s Essel Group 4 were loaned to suspicious entities. There are also reports of bribery. Customers want their bank accounts to be properly investigated and no one to interfere. Corruption at the highest levels in banks is not new. Last year, we saw Chanda Kochhar, CEO and Managing Director of ICICI Bank. Therefore, private banks, such as state-owned banks, need to be properly monitored so that their fraudulent transactions are prevented and they are regularly provided with detailed information on their assets, liabilities, risk assessments and future assessments. The RBI needs to ensure that the corporate governance of private banks goes smoothly

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