Just one day after it placed the financially troubled Yes Bank under a moratorium, the Reserve Bank of India announced a draft ‘Scheme of Reconstruction’ that entails the State Bank of India (SBI) investing capital to acquire a 49% stake in the restructured private lender. The alacrity with which the bailout has been proposed is commendable, given that Yes Bank’s stock tumbled 56% on the BSE on Friday, eroding shareholders’ holdings and dragging the 10-bank S&P BSE Bankex down with it, an indicator of the contagion risk that a sudden bank resolution can pose to the financial system. However, the decision to suspend normal business operations raises several worrying questions, both about the health of the banking sector, and the adequacy of the oversight role that regulators essay. Yes Bank’s troubles are not exactly new or unique and its problems with mounting bad and dodgy loans reflect the underlying woes in the borrower industries, ranging from real estate to power and non-banking financial companies. The continued inability of several corporates to repay their loans resulting in many landing up in insolvency proceedings has meant that lenders have been the hardest hit. Yes Bank, which is yet to report third-quarter financials, suffered a dramatic doubling in gross non-performing assets over the April-September six-month period to ₹17,134 crore, even as it scrambled to raise capital to shore up its balance sheet. With the economy in the throes of a persistent slowdown, the prospects of banks’ burden of bad loans easing soon are limited.
https://www.thehindu.com/opinion/editorial/banking-on-bailouts-the-hindu-editorial-on-yes-bank-crisis/article31003751.ece
An Indo-American News website. It covers Gossips, Politics, Movies, Technolgy, and Sports News and Photo Galleries and Live Coverage of Events via Youtube. The website is established in 2015 and is owned by AGK FIRE INC.
Just one day after it placed the financially troubled Yes Bank under a moratorium, the Reserve Bank of India announced a draft ‘Scheme of Reconstruction’ that entails the State Bank of India (SBI) investing capital to acquire a 49% stake in the restructured private lender. The alacrity with which the bailout has been proposed is commendable, given that Yes Bank’s stock tumbled 56% on the BSE on Friday, eroding shareholders’ holdings and dragging the 10-bank S&P BSE Bankex down with it, an indicator of the contagion risk that a sudden bank resolution can pose to the financial system. However, the decision to suspend normal business operations raises several worrying questions, both about the health of the banking sector, and the adequacy of the oversight role that regulators essay. Yes Bank’s troubles are not exactly new or unique and its problems with mounting bad and dodgy loans reflect the underlying woes in the borrower industries, ranging from real estate to power and non-banking financial companies. The continued inability of several corporates to repay their loans resulting in many landing up in insolvency proceedings has meant that lenders have been the hardest hit. Yes Bank, which is yet to report third-quarter financials, suffered a dramatic doubling in gross non-performing assets over the April-September six-month period to ₹17,134 crore, even as it scrambled to raise capital to shore up its balance sheet. With the economy in the throes of a persistent slowdown, the prospects of banks’ burden of bad loans easing soon are limited. https://www.thehindu.com/opinion/editorial/banking-on-bailouts-the-hindu-editorial-on-yes-bank-crisis/article31003751.ece
This website uses cookies.