Deciphering the crisis of the YES Bank | Editorial HT – editorials
The tragedy at YES Bank has been avoided: the government has assured all depositors of the bank that their money is safe, and the State Bank of India (OSE) has been asked to intervene as a white gentleman, but the crisis is One of the biggest lenders in India is far from over. There is work to be done in terms of recapitalization of the bank; SBI must maintain a maximum of 49% in the bank (for which it will pay around Rs 11,760 million rupees), and existing shareholders are seeing a significant dilution in their participation to 11%, so other investors will have to be found to inject around Rs 9.6 billion rupees. While some state-controlled companies and corporations will undoubtedly be recruited to do this, the government must ensure that banks remain attractive to investors. With the YES restructuring plan written to zero, the value of so-called additional level 1 bonds (there are reports that bondholders can seek legal recourse), it will not be easy for Indian banks to raise money through this route. plus. There is also the thorough process that the new bank administration will have to undertake to examine all the loans of the lenders to see if there are hidden surprises.
While this is being done, the research agencies have the task of investigating the role played by the founder and former head of the bank, Rana Kapoor, to foster the crisis. Kapoor sold all of his and his family’s participation in the bank after he was told, in 2018, that he could no longer be the head of the bank. While it is clear that many of the YES loans were granted to companies with questionable abilities to pay (about Rs 30,000 rupees of their book is debt classified as garbage), the question to ask is whether this was the result of bad practices of risk assessment. mentality (all, including many state banks that lent to some of these companies), or simple outdated bribes.
YES aggressive loans were not a secret operation, it has been known for some time. That, the treatment of the Reserve Bank of India to Mr. Kapoor, and the speed of the promoters to sell their stake in the bank, are issues that need investigation, as well as other financial transactions involving Mr. Kapoor and his family. Meanwhile, both the Ministry of Finance and RBI would do well to assess whether the latter did everything necessary and when it was necessary. In retrospect, Mr. Kapoor and YES Bank may have received a too long rope.