Submitted To :

Prof. Vibha Jain

Submitted By :

Gajender Kumar – 521

Yatinder – 531

Raquib Adnan Akhtar – 581

Vishal Sharma – 583

Shivam Sarvesh-576

Michio Rustom Chakma-527

1
 TABLE OF CONTENTS

Contents Page No.

Acknowledgement 3

Introduction 4

Share-Holding Pattern 5

Horizontal Analysis 6

Quarterly Results Analysis (Short Term) 13

2020 Moratorium And Capital Infusion 15

Restructuring of Yes Bank 17

NPA Cycle 20

Basel Regulation 21

Conclusion 22

References 23

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 ACKNOWLEDGEMENT

An Acknowledgement of gratitude one owes to one‟s teacher, parents, friends and a

well-wisher is beyond the ken of verbal encapsulation. However, the following words
attempt to express our sincere gratitude to them.

We would like to thank our former HOD DR. V.K. KAUL for giving us this wonderful
opportunity. Our Business Finance Professor, PROF. VIBHA JAIN who has always
been a source of guidance and support. Our parents for not only supporting us
financially but also for showering their love and blessings. Our friends for always
being there for us. We express our sincere thanks to them all.

3
 INTRODUCTION

Yes Bank Limited is an Indian public bank headquartered in Mumbai, India and was
founded by Rana Kapoor and Ashok Kapur in 2004. It offers wide range of banking
and financial products for corporate and retail customers through retail banking and
asset management services. Yes Bank has interests in syndicated loans and
corporate banking. It has three subsidiaries – „Yes Bank‟, „Yes Capital‟ and „Yes
Asset Management Services‟.

Yes bank had taken syndicated loans from eight large international entities including
ADB, OPIC, European investment bank, banks in Taiwan and Japan for amounts
ranging from US$30 million to US$410 million, which it in turn lend to small and
medium scale enterprises as well as large corporates. It has also both taken as well
as given short term loans to a number of retail and corporate banks in Taiwan,
Japan, the United States, and Europe. It has partnered with the US government
based OPIC and with Wells Fargo to support women entrepreneurs. Yes Bank used
to provide Unified Payments Interface (UPI) services for a number of major
companies, such as Airtel, Cleartrip, RedBus, and PhonePe among others. In
January 2020, it was responsible for handling 514 million UPI transactions out of the
1.31 billion made that month.

On 5 March 2020, the Reserve Bank of India (RBI) has taken control of the bank
which had an excessive amount of bad loans in an attempt to avoid the collapse of
the bank, later reconstructed the board and named Prashant Kumar former Chief
financial officer of SBI as new MD & CEO at Yes bank.

4
SHARE-HOLDING PATTERN

5
 HORIZONTAL ANALYSIS

 Horizontal analysis is used in the review of a company's financial

statements over multiple periods.
 It is usually depicted as a percentage growth over the same line item in
the base year.
 Horizontal analysis allows financial statement users to easily spot trends
and growth patterns.
 It can be manipulated to make the current period look better if specific
historical periods of poor performance are chosen as a comparison.
 Horizontal analysis allows investors and analysts to see what has been
driving a company's financial performance over a number of years, as
well as to spot trends and growth patterns.
[(Current year figures - Previous year figures)/Previous year
figures]*100
 Horizontal analysis is used for a period of two years but when the
comparison is for more than two years we can't use simple horizontal
analysis so we use extrapolation of it i.e. TREND ANALYSIS.

6
 Reasons for collapse of YES BANK

1. YES BANK was on loaning spree, their advances grew by 334% between 2014 to 2019.

7
 80000

70000

60000

50000
(IN CRORES)

40000

30000

20000

10000

0
Advances Deposits
ADVANCES

2. YES BANK’s Deposit rate was much lower than the advance rate.

8
The following chart shows their has been increase in deposits but the speed is less than the
advance rate.

9
 Chart Title
300000

250000

200000

150000

100000

50000

0
2014 2019

Advances Deposits

3. Credit-Deposit ratio is more than 100% in year 2019 which shows Yes Bank was receiving
less money than what it gave as advances.

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4. Non-Performing Assets to Total Advances ratio was just 0.05% in 2014, which increased in
the upcoming years and in 2018, it was 0.64% but there was a drastic increase in NPAs in
2019 and it became 1.86%.

NET NPA
2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2013 - 14 2014- 15 2015- 16 2016- 17 2017 - 18 2 0 1 8- 1 9

5. Net Profit drastically decreased from 4233 crores in year 2017-18 to 1709 crores in 2018-19.

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 NET-PROFITS
4500
4000
3500
3000
2500
2000
1500
1000
500
0
2018 2019

Due to Increasing NPA’s , Net-profit reduced by whooping 59.6% from 2018 to 2019.
6. Provisions for NPA were Rs.134 crores in 2013-14 when NET NPA was 0.05% and Rs.2567
crores in 2018-19 when NET NPA was 1.86%.
Percentage of Provisions(for NPA) to Total NPA in 2014 was 4.81% whereas in 2019 it was
just 0.57%.

PERCENTAGE OF PROVISIONS/TOTAL NPA

6

5
4.81

1
0.57

0
2014 2019

The rate of increase in NPA was whoopingly high whereas Provisions were not made by YES
BANK according to that proportion.

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 QUATERLY RESULTS ANALYSIS (DEC’19-SEP’19)

ANAYSIS

 The operating profit before provisions has decreased by more than

100% which means that it has become negative. Depositors stayed
away from opening fresh accounts and also there were massive
withdrawals by existing depositors. Thus, operating profit of the bank
decreased by a great deal.
 According to one estimate 25% of all Yes Bank loans were extended to
Non-Banking Financial Companies, real estate firms, and the
construction sector. These were the three sectors of the Indian economy
that have struggled the most over the past few years resulting in huge
numbers of NPA. Thus, Yes bank had to create huge number of
provision which further resulted in increasing the losses. Provisions of
more than 23000 crores were created between Sep‟19 to Dec‟19.
 Thus ,the net loss increased by 2992% which resulted in breaking the
back bone of the bank as the bank had already faced the loss of around
600 crores in Sep‟19
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 The gross NPA increased by 137.5% .The rising figures of NPA lead to a
crisis in March when ICRA downgraded the rating of Yes Bank's ₹526
billion (US$7.4 billion) in core bonds to a "D" rating, while Moody's
downgraded them to "Caa3”.
 Net NPA had to be controlled by keeping money in Provision a/c. This is
the reason why Net NPA increased by 13%.
 Since the company was facing loss and moreover share prices were
going down so, EPS became negative.
 As net income has reduced by a huge amount, so return on asset%
reached -23.3%.

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 2020 MORATORIUM AND CAPITAL INFUSION

On 5 March 2020, the Reserve Bank of India (RBI) announced that, in the interest of
its customers and depositors, it would suspend and supersede Yes Bank's board
and impose a 30-day moratorium on its operations. The RBI cited Yes Bank's
failures to raise new funding to cover its non-performing assets, inaccurate
statements of confidence in its ability to receive new funding, and its underreporting
of its non-performing assets, among other factors, as the impetus for this
moratorium. Customers are being limited from withdrawing more than ₹50,000
(US$700) from their accounts, except in certain exceptional circumstances (such as
to cover medical care, emergencies, higher education, and "obligatory expenses" for
ceremonies such as weddings). RBI governor Shaktikanta Das stated that the matter
would be resolved "swiftly"; Finance Minister Nirmala Sitharaman announced a
proposed turnaround plan, under which the State Bank of India would take a 49%
stake in Yes Bank and introduce a new board.

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On 6 March 2020, ICRA downgraded the rating of Yes Bank's ₹526 billion (US$7.4
billion) in core bonds to a "D" rating, while Moody's downgraded them to "Caa3".On
8 March 2020, Yes Bank founder Rana Kapoor was arrested by the Enforcement
Directorate under charges of money laundering.

The moratorium has caused major disruptions to e-commerce in India, due to a

number of prominent services and online stores having used Yes Bank as its
payment provider for UPI. Some services using Yes Bank in tandem with other
payment providers have seen fewer disruptions.

On 13 March 2020, the Union Cabinet approved the reconstruction scheme for Yes
Bank and that within three days of the notification of the scheme the moratorium
would be lifted. During this reconstruction, seven investors infused 12000 crore in
Yes bank and Prashant Kumar has been proposed as new CEO of the bank. These
investors include State Bank of India, ICICI Bank, HDFC Bank, Axis Bank, Kotak
Mahindra Bank, Rakesh Jhunjhunwala, Radhakishan Damani and Azim Premji
Trust.

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 RESTRUCTURING PLAN BY RBI

The rapidly deteriorating financial position of the Yes Bank Ltd. relating to
liquidity, capital and other critical parameters, and the absence of any credible
plan for infusion of capital has necessitated Reserve Bank of India to take
immediate action in public interest and particularly in the interest of the
depositors.

Accordingly, Yes Bank Ltd. was placed under moratorium by an order notified
by the Central Government on March 5, 2020.

In terms of section 45 of the Banking Regulation Act, 1949 (10 of 1949), during
the period of moratorium the Reserve Bank of India may, if so considered
necessary in public interest or in the interest of the depositors or to secure the
management of the banking company, frame a scheme of reconstruction or
amalgamation of the concerned banking company.

State Bank of India has expressed its willingness to make investment in Yes
Bank Ltd. and participate in its reconstruction scheme.

Therefore, in exercise of the powers conferred by sub-section (4) of section 45

of the Banking Regulation Act, 1949, the Reserve Bank of India, hereby made
the following scheme:

Short title and commencement

The Scheme was called „Yes Bank Ltd. Reconstruction Scheme, 2020‟.A
“Investor bank" i.e. State Bank of India was brought into action for
restructuring Yes Bank Ltd., a banking company having its Registered Office
at Yes Bank Tower, IFC-2, 15th Floor, Prabhadevi (W), Mumbai -400013,
Maharashtra;

Share capital of the reconstructed bank

From the Appointed date, in „clause V‟ of the Memorandum of Association of

the Reconstructed bank, the Authorized Capital shall stand altered to
Rs.50,00,00,00,000 (Rupees Five thousand crore only) and number of equity
shares will stand altered to 24,00,00,00,000 ( two thousand four hundred crore
only) of Rs.2/- (Rupees Two only) each aggregating to Rs.48,00,00,00,000
(Rupees Four thousand eight hundred crore only).

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The Investor bank shall agree to invest in the equity of the Reconstructed bank
to the extent that post infusion it holds 49% shareholding in the Reconstructed
bank at a price not less than Rs.10/- (Rupees ten only) [Face value of Rs.2/-
(Rupees two only) and premium of Rs.8/- (Rupees eight only)]. The Investor
bank shall not reduce its holding below 26% before completion of three years
from the date of infusion of the capital.

The investor bank shall have two nominee directors appointed on the Board of
the Reconstructed Bank. Reserve Bank of India may appoint Additional
Directors in exercise of the powers. It will be open to the Board of directors of
Yes Bank Ltd. to co-opt more directors to it, so however that the total
membership in the Board, excluding the Additional Directors appointed by the
Reserve Bank of India shall not exceed the maximum prescribed by the
Articles of Association. The appointment of the directors as above shall have
effect, notwithstanding non-fulfilment of requirements as to minimum
shareholding, qualification, experience or any other condition precedent, for
being a director of the Yes Bank Ltd. The members of the Board so appointed
shall continue in office for a period of one year, or until an alternate Board is
constituted by Yes Bank Ltd. through the normal procedure laid down in its
Memorandum and Articles of Association, whichever is later. Any defect in the
constitution or any vacancy in the Board shall not invalidate any meetings
conducted by the Board or any decision taken by it.

Rights and liabilities of the reconstructed bank

Unless otherwise expressly provided in the Scheme, all contracts, deeds,

bonds, agreements, powers of attorney, grants of legal representation and
other instruments of whatever nature, subsisting or having effect immediately
before the Appointed date, shall be effective to the extent and in the same
manner, as was applicable before the Scheme. It shall not be necessary to
obtain the consent of any third party or other person who is a party to any of
the aforesaid instruments or arrangements to give effect to them. All the
deposits with and liabilities of the Reconstructed bank, except as provided in
the scheme, and the rights, liabilities and obligations of its creditors, will
continue in the same manner and with the same terms and conditions,
completely unaffected by the Scheme. The instruments qualifying as
Additional Tier 1 capital, issued by the Yes Bank Ltd. under Basel III
framework, shall stand written down permanently, in full, with effect from the
appointed date. This is in conformity with the extant regulations issued by
Reserve Bank of India based on the Basel framework. No accountholder shall
be entitled to get any compensation from the reconstructed bank on account of
the changes occurred in the reconstructed bank by virtue of the Scheme. Any
cause of action accrued, suit, appeal or other proceeding of whatever nature

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pending, and decree or recovery certificate obtained by or against the
reconstructed bank, will remain unaffected by the Scheme.

CURRENT POSITION OF YES BANK

 Modest resource profile - ability to limit deposit outflow with lifting of the
moratorium and to build a retail liabilities franchise over the medium term
needs to be demonstrated.
 The bank witnessed a sharp increase in slippages in the third quarter of
fiscal 2020, largely stemming from challenges in the corporate loan
book. This led to a significant increase in gross non-performing assets
(NPAs) to 18.9% as on December 31, 2019, from 7.4% as on
September 30, 2019 (3.2% as on March 31, 2019). As a result, and
because of the associated provisioning cost, Yes Bank reported a large
loss of Rs. 18,560 crore in the third quarter of fiscal 2020.
 Liquidity coverage ratio was 74.6% as on December 31, 2019, against
the regulatory requirement of 100%. Nevertheless, that the ratio has
improved as on latest date supported by capital infusion into the bank.
Furthermore, as on the latest date, the bank's statutory liquidity ratio is
also in line with regulatory requirements.
 Stability in deposit base, with no material reduction from current levels
Improvement in asset quality and profitability.

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YES BANK NPA CYCLE (THE SLOW MOVING TITANIC TOWARDS ITS DEMISE)

The spike in Gross NPA in Q3 2019-20 is because of the large recognition of fresh NPA
in third quarter. The Gross NPA stood at ₹40,709 crore at the end of December 2019
compared to GNPA of ₹17,134 crore at the end of September 2019.

GNPA as a percentage of total loans soared to 18.87% at the end of December 2019
from 7.39% at the end of September 2019.

Net NPA as a percentage of total loans stood at 5.97% as on 31 December 2019

compared to 4.35% at the end of September quarter.

YES Bank's deposit base crashed from Rs 2.09 lakh crore in September 2019 to Rs
1.37 lakh crore as on March 4, 2020 indicating a complete break of trust in the
lender.

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 BASEL REGULATIONS: The Basel Accords are a series of three sets of banking
regulations that help to ensure financial institutions have enough capital on hand
to handle obligations.

Under Basel III, the minimum capital adequacy ratio that banks must maintain is
8%.

The capital adequacy ratio is calculated by dividing a bank's capital by its risk-
weighted assets.

Capital adequacy ratio fell to 4.1%, which is nearly a fourth of 16.3% reported at the
end of September quarter. This was the main reason for the government bailout and
RBI moratorium as the regulations required not met by the bank.

This decrease in CAR was due to increase in provision coverage ratio to 72.7% from
43.1% at the end of December 2019. The additional provisions amount to ₹15,422
crore at the end of December 2019.

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 CONCLUSION

The financial situation of yes bank has deteriorated over the last few years on
account of its inability to raise capital from sources approved by the reserve
bank of India. The rot lied in the way Yes bank lent its money with revelations
coming out of quid pro quo charges against its founder and ex Ceo Rana
Kapoor, which alleges that he got kickbacks for giving jumbo loans to firms of
dubious financial standing. The risk mitigation and management were missing
as the bank reported no major NPA on its books. Some share of blame also
lies with RBI as they failed to recognize the structural issues with the bank
underreporting its NPA in its yearly Financial Stability Report.

All these factors resulted in downgrades, triggering the invocation of bond

covenants by investors, and withdrawal of deposits. The chicken came home
to roost when RBI had to issue a moratorium on its lending and dismissed the
entire board as the bank had eroded its equity and was failing to meet the
Basel regulatory requirements. The resultant bailout of the bank by the
consortium of banks led by the State bank of India was put into effect by the
government. The Consortium agreed to invest in the equity of the
Reconstructed Yes bank to the extent that post-infusion the consortium holds
49% shareholding in the Reconstructed bank at a price not less than
Rs.10.The future of the bank depends on its ability to raise growth capital and
putting systems in place for prudent lending.

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 REFERENCES

1. http://www.moneycontrol.com

2. http://www.yesbank.in

3. https://www.knappily.com

4. https://www.livemint.com/

5. http://www.wikipedia.com

6. http://www.rbi.org.in

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