Yes Bank crises

YES Bank Crisis


YES bank has been one of the leading private sector banks involved in the business of banking and providing financial services. It was incorporate in 2004 by Mr Rana Kapoor and Ashok Kapoor. YES bank has been among the top 5 private banks of India.

It was till the crisis which happened in 2020, when the bank came in some real negative limelight. In 2020, YES Bank went into serious crisis after the bad loans book shoot up and because of some managerial frauds came out in the eYES of investors and general public. Currently SBI owns a 30% stake in the bank. Prashant Kumar, former CFO of SBI is currently the CEO of YES bank.

Case Registered Against Yes Bank Founder:

On march 7, Rana Kapoor and YES Bank came in real spotlight as a case was registered against Rana Kapoor, the chairman of YES Bank. He was alleged for fraud and financial cheating regarding the sanctions of loans by YESBank to major Bigshots and their groups. Mr Dheeraj and Kapil who were the promoters of DHFL were also named in the charge sheet filed. Also, DUVPL which is said to be promoted by Rana’s daughters were also involved in this huge scam.

Involvement Of Other Firms:

The Enforcement Director clearly stated that he misused YESBank’s credit facilities to receive undue monetary benefits for his personal asset creation. Other major firms involved in this scam were YES capital, Morgan Credit, DOIT Ventures, RAB Enterprises, etc. The amount of the scam was predicted to be somewhere close to 5050 crores of rupees.

The Enforcement Director accused him for receiving undue and personal benefits in exchange of providing credit facilities. Also, it was said that Mr Kapoor was the final controlling authority and hence everything was happening by his orders and under his nose. Final decisions were taken by him for all the transactions. YES bank was in complete control of Kapoor during that time.

Involvement Of RBI:

It was on 5th of March, when the RBI officially declared that it was superseding all the top-level management and Directors for a month because of serious damage in reputation and financial position of the YES Bank.

After suspension of directors, RBI gave an official statement that it is putting a Cap on withdrawal limit of Rs 50000. Because of this decision, it created fear among the depositors and stakeholders and the direct customers of YES Bank. The RBI placed the bank under Moratorium and declared that looking at the situation, it was the only option left with them. It future said that to keep public confidence in banking sector and in absence of revival plan, putting Moratorium is only the best possible alternative left.

Use Of Banks Credit Facility For Personal Use:

As per the reports presented by CBI, Kapoor used to give loans and huge credit facilities to DHFL through YES Bank and in favour of that, he used to receive major monetary benefits for his personal use and also for many other companies which were directly or indirectly handled by him and his family. Basically, he was using YES Bank’s credit facilities to lend and in favour of that receiving huge money for his personal and family use.

Ignoring The Warnings Raised On Banks Asset Quality:

YES Bank was incorporated in 2004 and in 11 year’s time till 2015, it was among the biggest private lenders in the country. Also in the year of 2016, a global financial service company namely ‘UBS’ raised questions about the asset quality of bank. As per their report, the bank had lended more than its total net worth which was obviously very very strange. Also, it was lended to companies which seemed to be not able to pay back all the huge credit loans. Even after such warnings from USB, the bank continued to give large credit facilities and meanwhile also became the 5th largest private sector bank on India. They clearly ignored all the direct questions raised by USB. Also, the thing to understand is that the type of companies to which YES bank was financing is the real reason for its crisis. As per a report, almost 1/4th of all YESBank loans were given to Non-banking financial companies, construction and real estate sectors and the builder lobby.  Obviously, this are the most risky sectors and specially in India, these sectors have always been in crisis. Hence YESbank was overexposed to such risks since the beginning. And just after few years, all lending’s started to be non-performing as defaults increased and NPA started going up drastically.

Impact On Overall Banking Industry:

Hence it can be said that the bank lost out on capital money from its debtors as well as Investors. Also, we need to understand the affect of this crisis over other banks and lenders, specially the private banks. The whole banking industry runs on Trust factor. This fallout of YES bank can sure create dounts on depositors and restrain them from investing in other private banks too.

It was on march 6, RBI released a Revival plan for YES bank. As per the plan, SBI could hold49% stake and will hold on at least 25% for the next 3 years.


To conclude, it can be said that the YES bank crisis was not just a result of negligence and poor managerial policies. Indeed, it was the mix up of wrong management intentions, frauds, misuse of public money, not much interference from regulators, baseless findings to big corporates without credit eligibility, etc.

To avoid such scams in future especially in banking industry is very much important to keep the trust of general public on overall banking sector.

Regulators like RBI and SEBI should have more direct interference in day-to-day operations of banks.

RBI can have more strict policies for all banks.

Unbiased Audits should be done at regular intervals to keep a check. Can set up a committee to understand detailed analysis of what actually happened with YES bank. Banks should check credit eligibility as well as repayment capabilities of Individuals or Companies to whom they are lending huge amounts. There can be an internal as well as external audit done twice a year.

This are the few points which according to me is of utmost importance to avoid such crisis in future especially in banking industry.

Author: Karansinh Gohil,
Navrachna university 1st year

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