Resolution
India: Yes Bank Restructuring, 2020
Purpose
To take immediate action in public and depositor interest to address Yes Bank’s “rapidly deteriorating financial position” and “lack of credible plan for infusion of capital” (RBI 2020d)
Key Terms
- Size and Nature of InstitutionFourth-largest private bank with USD 50 billion of assets in 2019
- Source of FailureOverexposure to infrastructure and power sectors, extraordinary credit provisions, inability to raise equity capital from the markets
- Start DateDraft: March 5, 2020; Final: March 13, 2020
- End DateMarch 13, 2023
- Approach to Resolution and RestructuringRBI forced Yes Bank into a moratorium, replaced the board, limited withdrawals to INR 50,000 (~USD 663) per customer, provided a special liquidity facility, and introduced a capital injection of INR 100 billion with public-private participation
- OutcomesEquity holders were diluted down with the capital injection; AT1 holders of INR 84 billion were written down; RBI was paid back its special liquidity facility in September 2020; investors secured a return of 70% based on market prices in three years; Yes Bank deposits grew to USD 27 billion in 2023 from USD 14 billion in 2020
- Notable FeaturesBank-led restructuring with public-private participation; tax exemptions and lock-in period for new investors in the rescue plan; rare example of writing down AT1 bond investors in a going concern bank resolution
Yes Bank was suffering from liquidity outflows in the second half of 2019 owing to a combination of deposit withdrawals, invocation of pledged shares, losses from extraordinary credit provisions, and overexposure to stressed sectors like power and infrastructure. In December 2019, Yes Bank reported a Common Equity Tier 1 capital ratio at 0.6%, far below the Reserve Bank of India (RBI) mandated levels, and a quarterly loss of 185 billion Indian rupees (INR; USD 2.5 billion). In early March 2020, the RBI and the Ministry of Finance announced a restructuring plan for India’s fourth-largest private bank, Yes Bank, to prevent a run on the private banking system and preserve financial stability. The rescue plan comprised placing the bank in a moratorium, replacing the board, appointing an interim administrator, limiting withdrawals, providing capital injections, and extending a liquidity facility for INR 600 billion. The RBI helped engineer the public and private participation in Yes Bank’s ad hoc capital injection of INR 100 billion with a three-year lock-in period. The tax law was amended to allow capital gains tax exemption for all new investors participating in Yes Bank’s capital injection. In the three years since the announcement of the rescue plan, Yes Bank’s liquidity outflow has stopped, as the deposit base has grown to USD 27 billion, and the bank’s new investors have secured returns of 70% on the market value of their investments.
This case study describes the Reserve Bank of India (RBI) restructuring plan for Yes Bank announced by the Ministry of Finance (MoF) in March 2020. This plan involved a capital injection of 100 billion Indian rupees (INR; USD 1.3 billion)FNPer Yahoo Finance, USD 1 = INR 75.4 as of March 31, 2020., an emergency liquidity facility of INR 600 billion, and a moratorium that limited depositor withdrawals (For details on the capital injection, see Gupta forthcoming-a; for details on the moratorium see Gupta, forthcoming-b).
Founded in 2004, Yes Bank grew rapidly and was India’s fourth-largest private sector bank with INR 3.8 trillion (USD 50.5 billion) in assets by March 31, 2019 (YESB 2019). In the mid-2010s, the RBI and private-sector analysts identified serious governance weaknesses, exposure to large troubled nonbank financial companies, and high levels of delinquent loans. Yes Bank lost nearly half its market value after a major borrower, IL&FS, defaulted on its loans in September 2018 sparking “India’s Lehman moment” (Parkin 2019a; 2019c).
In January 2019, the RBI refused to extend the tenure of Yes Bank founder and CEO Rana Kapoor owing to concerns about corporate governance and inadequate reporting of nonperforming loans (NPLs); Kapoor was later arrested for embezzlement, abuse of power, and accepting kickbacks from corporate borrowers (Jagannath 2020). In March 2019, the bank appointed a new CEO to guide capital raising and clean-up efforts (Fortune 2019).
In October 2019, a combination of events led to liquidity outflows at Yes Bank, including deposit outflows, invocation of the founder’s pledged shares (when a lender sells pledged shares), and a breach in liquidity coverage ratio (LCR) requirements because of the financial distress of a state-owned small cooperative bank called Punjab and Maharashtra Co-operative Bank (YESB 2020a).
Following defaults by two major borrowers that lifted its NPLs to over USD 2.3 billion, Yes Bank reported in the same month that it was in “advanced discussions” to raise about USD 1.2 billion of capital from foreign and domestic investors (Parkin 2019c; YESB 2021). According to the account of a leading business journalist, the deal did not go through, partly because the RBI declined the investors’ request for an official guarantee against all losses on Yes Bank’s stressed loan book (Bandyopadhyay 2020). Yes Bank’s shares lost 80% of their value between January and September 2019 due to concerns of bad loans and capital adequacy ratio (Parkin 2019b). Yes Bank was able to raise INR 19.3 billion in qualified institutional placement (QIP) in August 2019 to address the bank’s NPL problem (YESB 2022). The delay in capital raising led to a downgrade by credit ratings agencies (YESB 2020a).
In December 2019, Yes Bank reported a quarterly loss of INR 185 billion and a common equity Tier 1 (CET1) ratio of 0.62%, significantly breaching the RBI mandated level of 7.4%. This unexpected loss was the result of extraordinary credit provisions in the second half of 2019, related to slippages in the corporate loan book in the power and infrastructure sectors. Yes Bank’s deposits had declined from INR 2.1 trillion in September 2019 to INR 1.7 trillion by December 2019. Yes Bank’s deposit base continued to decline to INR 1.1 trillion by March 31, 2020 and to INR 1.0 trillion by May 2, 2020 (YESB 2020a).
On March 3, 2020, RBI Governor Shaktikanta Das asserted the RBI’s commitment to banking sector stability and said that it would “never allow a major bank to you know . . . [fail]” (RBI 2020f). On March 5, 2020, the Ministry of Finance (MoF) placed Yes Bank under a moratoriumFNA moratorium in India is similar to receivership in the US, in that the troubled financial institution is protected to maximize value of the assets of the institution in an orderly manner. (See Appendix B for details.) and limited withdrawals to INR 50,000 (USD 663) per customer for 30 days (Gupta, forthcoming-b; MoF 2020a). On March 6, 2020, the RBI released a draft resolution plan and announced a capital injection by a consortium of banks, with the government-owned State Bank of India (SBI) as the leading “investor bank,” receiving 48.2% of equity in the reconstructed bank (RBI 2020a). On March 13, 2020, as part of the final restructuring plan, the MoF stated that the SBI and other investors were willing to participate in the capital injection and that the moratorium would end on March 18, 2020. Withdrawal restrictions ended with the moratorium, but the reconstructed board was to continue for one year (MoF 2020a). Yes Bank successfully formed an alternate board after restructuring on July 15, 2022 as per clause 5(7) of the RBI’s plan (YESB 2023a).
As of March 14, 2020, eight investors (SBI, HDFC, ICICI Bank, Axis Bank, Kotak Mahindra Bank, Bandhan Bank, Federal Bank, IDFC First Bank) provided a recapitalization of INR 100 billion to Yes Bank with a three year lock-in period (for details, see Gupta, forthcoming-a; YESB 2021). On the same day, Yes Bank took a permanent write-down of INR 84 billion in Additional Tier 1 (AT1) capital (YESB 2020a). As shown in Figure 1, Yes Bank had INR 152 billion of CET1 capital as of March 31, 2020, which included the INR 100 billion capital injection and INR 84 billion AT1 write-down. This implies that Yes Bank had negative equity capital before RBI’s rescue plan.
The RBI also extended a INR 600 billion credit line to Yes Bank to meet the needs of depositors, promising that none would lose money. Yes Bank borrowed INR 500 billion on the credit line and repaid the amount by September (MS 2020). Governor Das stated that the RBI would provide the needed liquidity support and that “never in the history of banks [in India] have depositors lost money” (The Tribune 2020).
On July 23, 2020, Yes Bank successfully raised INR 148.7 billion from a follow-on public offering (FPO) by issuing 12.5 million shares at INR 12 to 13 per share; this was not mentioned in the RBI’s reconstruction plan (Mint 2020; YESB 2021). SBI also participated in the FPO by investing INR 17.6 billion (part of the INR 148.7 billion raise). As a result of the FPO, the SBI’s position was reduced to 30% as of March 31, 2021, from 48.2% as of March 30, 2020 (SBI 2021). In August 2020, Moody’s upgraded Yes Bank’s long-term credit rating to B3 with a stable outlook (YESB 2023b). In March 2021, Yes Bank Chairman Sunil Mehta reported that the bank’s CET1 ratio had improved from 6.3% in 2020 to 11.2% in 2021 (see Figure 1) (YESB 2021). Mehta stated that Yes Bank’s rescue was the first bank-led restructuring plan in India’s history (YESB 2020a).
Figure 1: Yes Bank’s Capital Adequacy Ratios
Sources: YESB 2020a; YESB 2021b; YESB 2022d; YESB 2023a; YESB 2023b.
In March 2022, Yes Bank reported a successful return to full year profitability for the first time since the restructuring plan in March 2020 (YESB 2022). In July 2022, JC Flowers, a private equity firm, agreed to purchase a stressed loan pool from Yes Bank for INR 480 billion (MC 2022). Later in July, two private equity groups agreed to purchase a 10% equity stake in the bank for INR 89 billion, reducing the SBI’s stake to 26% (Sen 2022).
The three-year lock-in period for the eight financial institutions that participated in the recapitalization ended on March 13, 2023 (see Appendix A). They have made 70% returns on their investment, based on market prices at the end of the lock-in period. The RBI has asked the private investors to sell their stakes gradually to avoid destabilizing the bank (Gopakumar 2023). As of March 31, 2023, Yes Bank’s CET1 ratio has improved to 13.3% from 6.3% in 2020 (see Figure 1) (SBI 2022; YESB 2023b).
Figure 2: Timeline of the Yes Bank Intervention
Source: Author’s analysis.
In July 2020, RBI Governor Das called the resolution of Yes Bank “timely and successful” and “non-disruptive” of the broader financial system (Das 2020, 5). Governor Das said the RBI decided to intervene when Yes Bank’s net worth was still positive; he said the RBI’s quick action helped protect depositors and revived the bank under its new owners (Das 2020).
Also in July 2020, the RBI released a discussion paper on the governance in commercial banks and formed an internal working group on ownership and governance of private banks, with the goal of aligning the regulatory framework with the global best practices. A former RBI governor, D. Subbarao, while speaking to a leading business journalist, has stated that improving the RBI’s supervision of banks requires a greater focus on the implementation of current powers, rather than the enactment of new regulation. Subbarao further states that the RBI’s efforts to improve supervision could learn from the responses by the Federal Reserve and the Bank of England after the Global Financial Crisis, where external committees were appointed to evaluate, critique, and learn from the regulatory response (Bandyopadhyay 2020).
A 2021 study concluded that the RBI and the Ministry of Finance’s joint restructuring plan helped put Yes Bank back on track. The authors noted that the regulators may have provided too much time to the former management of Yes Bank, and that the crisis has uncovered a need for stricter and speedier supervision by the RBI (Akhtar, Alam, and Khan 2021). Raghuram Rajan, a former RBI governor, stated in an interview that the RBI could learn from the Federal Reserve’s supervision of systemically important banks, which involves more thorough and regular interactions from having “feet on the ground and people in place” (Bandyopadhyay 2020).
Another 2021 study suggested that the regulator should focus on the strategy and risk management practices at a bank, including a continuous assessment of a promoter’s bank license and the selection of independent board members with adequate social distance from the management. Both reports stress the failure of Yes Bank’s auditors in the build-up to its rescue and suggest more focused selection and regulation for the benefit of all the bank’s stakeholders (Akhtar, Alam, and Khan 2021; Deb 2021).
Raghuram Rajan has defended the RBI against the allegation of a failure to adequately monitor Yes Bank. He states that the regulator is merely a referee and not a player in the commercial lending process, who can largely only suggest the addition of adequate risk buffers amidst poor lending practices. Rajan further states that the bad loan problem is created by a combination of promoters, bankers, and the business environments, which separates the regulator from each commercial decision taken by the bank (Ramachandran and Ramesh 2020).
Key Design Decisions
Purpose1
In December 2019, Yes Bank reported a quarterly loss of INR 185 billion and a CET1 ratio of 0.62%, with capital requirements breaching the RBI mandated level of 7.375%. This was due to extraordinary credit provisions in the second half of 2019, related to slippages in the corporate loan book to the power and infrastructure sectors. Yes Bank’s deposits had declined from INR 2.1 trillion in September 2019 to INR 1.7 trillion by December 2019 (YESB 2020a).
In early March 2020, Yes Bank had a declining financial position due to an inability to raise capital independently, and an outflow of liquidity through deposit withdrawals and increasing credit losses on its nonperforming loan portfolio (RBI 2020c). Yes Bank had cash outflow of INR 85 billion as a prepayment by February 29, 2020, which have been the final trigger to prompt the RBI to draft a rescue plan (YESB 2020a).
On March 5, 2020, the RBI recommended the Government of India to take immediate action in public interest and to protect all depositors, due to Yes Bank’s “rapidly deteriorating financial position” by both capital and liquidity parameters (MoF 2020b, 1). The RBI found it necessary to take over the management of the bank and draft a restructuring plan during the period of moratorium; the moratorium limited depositor withdrawal, while allowing Yes Bank to remain open and implement the RBI’s rescue plan (see Appendix B). The MoF also announced a capital injection of INR 100 billion led by the State Bank of India (SBI)FNThe SBI has been special to India’s socio-economic history for over 210 years. The bank in its current form was created on July 1, 1955, by an Act of Parliament (Kumar 2021, xvii) and other willing investors as a part of its restructuring plan (MoF 2020a; RBI 2020c). The RBI’s goal was to immediately protect depositors, secure the management of the bank, and to formulate an effective reconstruction of the bank (MoF 2020b). Yes Bank was deemed to be non-viable, as a result of the restructuring plan by the RBI (YESB 2020a).
The RBI preferred a “bank and market led revival” for Yes Bank, rather than a government-mandated restructuring. Since early 2019, the RBI had been facilitating discussions between Yes Bank and private equity firms to assess opportunities to help the bank raise equity capital. But Yes Bank’s continued outflow of liquidity and unsuccessful attempts to raise capital forced the RBI to formulate a restructuring solution (RBI 2020c). Rajnish Kumar, the SBI’s former chair, stated in his memoir that: “The failure of Yes Bank would definitely pose a significant threat to the franchise of private banks in the country, particularly the smaller banks” (Kumar 2021, 15).
It was reported that the RBI wanted a wide pool of private investors to provide equity capital to Yes Bank to ensure that the rescue was not viewed as nationalization. Additionally, there was news that the public sector banksFNPublic sector banks are defined as those banks where the Government of India has more than 50% ownership. would provide INR 300 billion of liquidity to Yes Bank through bulk deposits (Shetty and Sinha 2020). Yes Bank’s deposits came down by 34% between September 2019 and March 2020 to INR 1.37 trillion (Ghosh 2020). It was reported in the press on March 18, 2020, that Yes Bank received INR 220 billion in certificates of deposits and INR 90 billion in interbank loans backed by the RBI, as liquidity to address deposit withdrawals (Dave and Shukla 2020). These liquidity provisions were not confirmed and were not a part of the RBI’s official plans.
We also learn that the SBI was reluctant to be the sole investor in Yes Bank. Kumar states that the SBI’s last takeover of a family-owned local bank in the early 1990s was a “complete disaster” and had adversely affected performance (Kumar 2021, 10). Kumar also had concerns of “real risk of a run on Yes Bank” after the moratorium would be lifted later on April 3, 2020 (Kumar 2021, 14).
In early March 2020, Kumar had discussions with Blackstone and Goldman Sachs about a potential investment in Yes Bank. Kumar recalls an exploratory call with Blackstone founder Stephen A. Schwarzman, where they discussed whether Blackstone could be a potential lead investor for Yes Bank. Amit Dixit, Blackstone’s India head, offered to take a 20% stake and requested two board seats in Yes Bank, which would require the RBI’s approvalFNRBI approval is required for an equity investment in a bank beyond 5% (Kumar 2021, 11).. HDFC, India’s largest private bank, was willing to co-invest for a capital contribution of INR 10 billion. Blackstone estimated that Yes Bank’s losses would be around INR 450 billion. Dixit stressed to Kumar the importance of Yes Bank receiving an immediate capital infusion of INR 220 billion to be fully capitalized and an unsecured loan of INR 500 billion from the RBI. The SBI was willing to contribute INR 70 billion for an equity stake of 30% in Yes Bank, along with other investors. Kumar indicates an early consensus among potential investors would require a write-down of all the equity and AT1 bonds, and a capital gains tax exemption as preconditions for investment (Kumar 2021).
Kumar had discussions with various potential foreign investors such as Brookfield, Carlyle, KKR, and Tilden Park to help reach the capital infusion target. Kumar was also in touch with prominent domestic investors such as Rakesh Jhunjhunwala, Premji Invest, and D Mart to contribute INR 5 billion each towards the capital infusion for Yes Bank. Kumar indicated that Blackstone could only provide capital by March 19, while the RBI was insistent that the funding be confirmed by March 13. There was also reluctance to raise capital from domestic individual investors due to potential allegations of profiteering from the rescue operations. Kumar indicated a 49.9% limitation of public ownership in Yes Bank after the capital infusion (Kumar 2021).
The AT1 bondholder dues posed a legal challenge to the new investors participating in Yes Bank’s restructuring. Kumar noted that the AT1 bondholders’ proposal for conversion of dues to equity would raise the cost for new investors by 20%. Kumar was relieved to find out on March 9, 2020, that four of India’s leading private sector banks—HDFC, Kotak Mahindra Bank, ICICI Bank, and Axis Bank—would contribute a total of INR 31 billion for Yes Bank’s capital infusion. Kumar points out that the threat of a total breakdown in the deposit taking ability of private banks in India prompted participation from the leading banks (Kumar 2021).
Yes Bank received an equity capital injection of INR 100 billion on March 14, 2020 (YESB 2021). As per the final restructuring plan, the moratorium period ended at 6:00 pm on March 18, 2020 (MoF 2020b).
Part of a Package1
The RBI announced the injection of INR 100 billion of equity capital from the SBI and other private banks as a part of its restructuring plan on March 13, 2020 (MoF 2020a; RBI 2020c). The SBI provided the largest capital contribution of INR 60.5 billion, followed by HDFC and ICICI Bank providing INR 10 billion each. The remaining capital injection was provided by five other private banks in India (YESB 2021).
The RBI also provided Yes Bank with up to INR 600 billion in liquidity assistance from its special liquidity facility (SLF), which was only provided to Yes Bank. Yes Bank borrowed INR 500 billion of the total INR 600 billion of secured lending offered by the RBI through the SLF in March 2020 (The Tribune 2020; YESB 2020a). This liquidity of INR 500 billion from the RBI helped Yes Bank deal with the outflow of deposits after March 2020 (MS 2020). It was not clear what collateral the RBI accepted in return for providing this emergency liquidity to Yes Bank.
The RBI had also raised the deposit insurance limit provided by the Deposit Insurance and Credit Guarantee Corporate (DICGC, subsidiary of RBI) from INR 100,000 to INR 500,000 per depositor in February 2020 but did not explicitly refer to Yes Bank in its disclosures (Dubey 2020; RBI 2020g).
Legal Authority1
The Government of India and the RBI acted to resolve Yes Bank under section 45 of the Banking Regulation Act, 1949 (10 of 1949) (BRA) (MoF 2020a). Under this clause, the RBI can in public interest take over the management of a bank or frame a restructuring plan (RBI 2020d). The RBI replaced the board of directors of Yes Bank under 36ACA of the BRA (RBI 2020b). The RBI provided additional directions to Yes Bank under 35A of the BRA (RBI 2020a). The RBI could appoint additional directors to the restructured entity under subsection 1 of section 36AB of the BRA (RBI 2020d). The government, based on the RBI’s recommendation, imposed a moratorium on Yes Bank as per section 45 of the BRA (YESB 2020a).
The RBI is constituted by the Reserve Bank of India Act, 1934 (RBI 2020a). Yes Bank is a banking company governed by the Banking Regulation Act, 1949 (YESB 2023a). There was no new legislation passed to facilitate this capital injection and restructuring.
As part of the deal, the MoF agreed to exempt the investors who injected new capital into Yes Bank from capital gains taxes on any profits resulting from this participation period under Income-tax Act 1961 (43 of 1961) (MoF 2020b). The Central Board of Direct Taxes had to amend rules in the Finance Act 2019 to allow this exemption (Dhasmana 2020).
Administration1
The RBI authored and disclosed a draft resolution plan titled “Yes Bank Ltd. Reconstruction Scheme, 2020” on March 6, 2020, along with providing an additional three days for accepting comments (RBI 2020a). The Yes Bank restructuring plan was announced by the Chief General Manager of the RBI and signed by the Joint Secretary to the Government of India (RBI 2020d). The RBI was negotiating with public and private investors to contribute to the capital injection for Yes Bank (Shukla and Rebello 2020). In the week following the RBI’s announcement, Finance Minister Sitharaman confirmed to the press that the RBI was engaging with investors to seek participation in Yes Bank’s restructuring (ET 2020b).
Governance1
The RBI was to appoint an administrator for the reconstructed bank, who was to leave his/her office within seven days of the end of the moratorium on Yes Bank. The MoF’s restructuring plan appointed a new board to the reconstructed Yes Bank comprising four members, with the former CFO of the SBI (lead investor bank) as the CEO and the former nonexecutive chairman of Punjab National Bank (leading public-sector bank) as the nonexecutive chairman. The reconstructed board was to remain in place for one year or until an alternate board was constructed as per the articles of association of Yes Bank. The SBI was allowed to nominate two additional directors and any investor with 15% shareholding was allowed to nominate one additional director to the board. The new investors were to be treated as public shareholders in the reconstructed bank for a period of five years from the date of share allotment (MoF 2020b).
Yes Bank was required to submit filings to the RBI, periodically to report on the implementation of the restructuring plan. Any concerns regarding the execution of the plan were to be directed to the RBI, and the central bank had final say on the matter. Any suggestions or concerns about the draft restructuring plan were to be directed to the RBI’s Department of Regulation (RBI 2020d).
On March 26, 2020, eight individuals were appointed to form the board of directors of the reconstructed Yes Bank as per the RBI’s plan. Prashant Kumar, the SBI veteran and former head of the bank’s Kolkata circle, was appointed as Yes Bank’s CEO and managing director (MD), along with former head of AIG India, Sunil Mehta, as the nonexecutive chairman. The rest of the board comprised of two members nominated by the RBI, two members nominated by the SBI (as the lead investor bank), and two other industry professionals; all with backgrounds combining public and private sector experience (YESB 2020a).
Yes Bank successfully formed an alternate board after restructuring on July 15, 2022, as per clause 5(7) of the RBI’s plan. The two additional directors appointed by the RBI vacated their post as of July 26, 2022. Following a recommendation from the new board, the RBI approved R.S. Gandhi, a former deputy governor at the RBI and member of BCBS, as a new nonexecutive chairman for Yes Bank (YESB 2023a). Prashant Kumar, Yes Bank’s administrator, was at first provided with an interim extension in his role as CEO and MD in July 2022 and was further reappointed for another three years in October 2022. Prashant Kumar’s leadership has been attributed for the success of the rescue plan and ensuring “a real turnaround from the brink of collapse within an extremely short time frame of just one year” (YESB 2023a).
In February 2023, Rajan Pental, a senior group president, was appointed as the executive director of the bank for three years, given his success in building the retail banking franchise of Yes Bank (YESB 2023a).
There was no other oversight requirement from the RBI for the administration of the capital infusion into Yes Bank.
Communication1
Yes Bank’s restructuring plan was announced by an extraordinary notification in the Official Gazette by the Banking Division of the Ministry of Finance on March 5, 2020 (MoF 2020a). This rescue plan was presented after recommendations from the RBI and imposed withdrawal limits from depositors of Yes Bank (MoF 2020a). On the same day, the RBI disclosed two separate press releases to place Yes Bank in moratorium, replace its board, and appoint an interim administrator (RBI 2020c; RBI 2020b). On March 6, the RBI disclosed a draft plan with details of the restructurings and allowed three days to accept comments (RBI 2020d). On March 13, the MoF presented the final restructuring plan, including details such as the SBI leading the capital injection. The final rescue plan, unlike the draft plan, did not mention the treatment of AT1 bonds (Kumar 2021; MoF 2020b).
Yes Bank issued a press release on March 14, 2020, disclosing the adoption of the restructuring plan, the capital injection of INR 100 billion, the write down of AT1 bonds and its post-infusion financial highlights (YESB 2020b).
After the announcement of the RBI’s rescue plan, despite the lack of retail depositor panic, some state governments began to advise their departments to shift funds away from private sector banks to public sector banks. The RBI had to write to the chief secretaries of states to warn that such a concern over deposits in private sector banks was “highly misplaced” and could have destabilizing effects on the banking and financial system (Ramchandani and Jethwani 2021).
Kumar (2021) reveals that following the end of the moratorium, corporations and state governments withdrew bulk depositsFNThe RBI defines bulk deposits as single term deposits of INR 20 million or more for commercial banks and small finance banks. from Yes Bank. The exact extent of the bulk deposit flight is unclear, but the RBI’s special liquidity facility of INR 500 billion was essential to Yes Bank surviving that period, according to Kumar (Kumar 2021).
Following the RBI’s announcement of the moratorium, the former finance minister and senior member of the opposition Congress party, P. Chidambaram, blamed the problems at Yes Bank on the ruling BJP government and on a general mismanagement of financial institutions. He suggested an alternative rescue plan for Yes Bank, which involved SBI taking over Yes Bank’s loan book for INR 1 and providing assurances to bank depositors of receiving their funds in full (Express Web Desk 2020).
In July 2020, RBI Governor Das called the resolution of Yes Bank “timely and successful” and “non-disruptive” of the broader financial system (Das 2020, 5). Governor Das said the RBI decided to intervene when Yes Bank’s net worth was still positive; he said the RBI’s quick action helped protect depositors and revived the bank under new owners (Das 2020).
Source and Size of Funding1
As per the final restructuring scheme on March 13, 2020, Yes Bank was to issue 10 billion equity shares at INR 10 per share (face value of INR 2 per share), resulting in a total capital infusion of INR 100 billion (YESB 2021).
The largest capital infusion of INR 60.5 billion was from the SBI, which is the largest public-sector bank in India (YESB 2021). The other seven entities are private-sector banks and represent one-third of all the scheduled private banks licensed by the RBI in India (RBI 2021b). The largest private capital infusion into Yes Bank was from HDFC Ltd. (parent company of HDFC Bank) and ICICI Bank at INR 10 billion each (YESB 2020a). The RBI had classified the SBI, HDFC Bank, and ICICI Bank as domestic systemically important banks (D-SIBs) in 2018 (RBI 2021a). Former SBI Chairman Kumar states in his book that he contacted other private banks, including Bandhan Bank and IDFC Bank, to help “bridge the gap between the offers and the required investment” for Yes Bank (PTI 2021).
RBI did not provide any funding directly for the resolution plan.
On July 23, 2020, Yes Bank successfully raised INR 148.7 billion from the markets via a follow-on public offering (FPO) by issuing 12.5 million shares at INR 12 to 13 per share (Mint 2020; YESB 2021). This was not part of the RBI’s plan.
In July 2022, Yes Bank approved proposals from the private equity groups Carlyle and Advent International to sell a 10% equity stake in the bank for INR 89.0 billion (Sen 2022). In December 2022, the RBI gave conditional approval to both Carlyle and Advent, both of whom are evaluating the conditions. The funds raised would be infused by issuing new shares of USD 640 million and warrants for USD 475 million (Reuters 2022).
In February 2024, the RBI approved HDFC Bank to acquire an aggregate holding of 9.5% in Yes Bank within a period of one year (YESB 2024). As of March 2023, HDFC Limited (parent of HDFC Bank) owned a 3.5% stake in Yes Bank and had contributed INR 10 billion towards the RBI’s rescue plan in March 2020 (for details of the capital injection, see Gupta, forthcoming-a).
Approach to Resolution and Restructuring1
The RBI and MoF presented the final restructuring plan for Yes Bank on March 13, 2020, and utilized a recapitalization approach, with the SBI, India’s largest government-owned bank, as the lead investor (MoF 2020b). There was also participation from seven other privately-owned Indian banks in the capital injection (YESB 2021). The MoF, after considering a request by the RBI, initially imposed a moratoriumFNA moratorium was designed to provide a corporate debtor some breathing space, while the new management can take over and recover the debtor from financial sickness. The term has been used increasingly since the adoption of the Insolvency and Bankruptcy Code (IBC), 2016 (IBC Laws 2023). Matters that require a moratorium are provided in Section 14 of the IBC 2016. A moratorium is a period where no judicial proceedings can be filed against the debtor during the specified period (IBC Laws 2023). (For more on the moratorium, see Appendix B; see also, Gupta, forthcoming-b.) on Yes Bank from 6:00 pm on March 5, 2020, to April 3, 2020 (MoF 2020a). As per the final restructuring plan, the moratorium period ended at 6:00 pm on March 18, 2020 (MoF 2020b).
The RBI forced Yes Bank into a moratorium, replaced the board, limited withdrawals to INR 50,000 (USD 663) during the moratorium, and introduced a capital injection plan led by the SBI, which would maintain its shareholding between 26% and 49% for a three-year period (MoF 2020a; RBI 2020a). On the same day, the RBI appointed the former CFO of the SBI, Prashant Kumar, as the administrator for Yes Bank under Section 36ACA(2) of the Banking Regulation Act , 1949 (PTI 2020).
The draft resolution plan on March 6, 2020, stated an increase in Yes Bank’s authorised capital to INR 50 billion (RBI 2020a). But, the final plan on March 13, 2020, increased the authorised capital from INR 11 billion to INR 62 billion (YESB 2020a). The shareholding terms for the lead investor were unchanged from the draft in the final restructuring plan. As can be seen in Figure 3, Yes Bank issued 10 billion equity shares at a face value of INR 2 per share, which leads to an immediate increase in share capital to INR 25 billion (YESB 2021).
The final plan appointed Prashant Kumar, the interim administrator, as the CEO and managing director of Yes Bank’s reconstructed board (MoF 2020b). Kumar continues to remain the CEO of Yes Bank today and recently reported the first successful return to full year profitability for Yes Bank since 2019 (YESB 2022). Rajnish Kumar, the SBI’s former chair, recalls picking Prashant for the Yes Bank role because of his successful performance in turning around the SBI’s business in western India (Kumar 2021). Prashant described the unique nature of the rescue plan in Yes Bank’s annual report for 2020: “It is unprecedented in the history of [Indian] banking that top financial institutions in the country came together to provide support to another bank” (YESB 2020a).
On June 26, 2020, the Government of India passed an ordinance which amended the Banking Regulation Act, 1949 (PRS India 2020). The amendments allow the RBI to place a debtor under a restructuring process without imposing a moratorium. Additionally, the ordinance also provided the RBI with powers to supersede the board of directors of a cooperative bank for up to five years under specific conditions, after consultation with the respective state governments (PRS India 2020). Legal commentators have pointed out that placing a bank under moratorium have a destabilizing effect, since depositors may continue to lose confidence in the bank and overall financial system (Ohri 2020).
The balance sheet of Yes Bank contracted dramatically after its restructuring (see Figure 3). Between March 2019 and March 2020, the total assets at Yes Bank shrank by INR 1.23 trillion to INR 2.58 trillion. On the asset side, the most significant reduction was the INR 700 billion reduction in loans and the INR 456 billion reduction in mostly government securities. On the liabilities side, Yes Bank had witnessed a withdrawal of deposits of INR 1.22 trillion by the end of March 2020. Yes Bank lost INR 105 billion of deposits from banks and other institutions in the one year ending March 31, 2020. After the rescue plan, Yes Bank received INR 520 billion of secured borrowing from the RBI to help stabilize the bank after loss of significant deposits and borrowings (YESB 2020a). Yes Bank repaid the RBI in September 2020, as the bank’s secured borrowing from the RBI was down to INR 54 billion by March 31, 2021 (YESB 2021). Yes Bank issued 10 million equity shares at INR 10 per share, with a book value of INR 2 per share. Yes Bank’s share capital increased by INR 20 billion due to this capital raise. The increase in share premium by INR 98 billion by March 31, 2020, is attributed to the additional capital provided to Yes Bank in the restructuring plan. Yes Bank reported a loss of INR 69.3 billion for the full year 2020, leading to effectively negative reserves at the end of March (YESB 2020a).
Yes Bank was rescued through INR 100 billion in capital injections from a consortium of banks led by the SBI, INR 84 billion of bailed-in AT1 bonds, and INR 600 billion in emergency lending facility from the RBI. As Yes Bank’s authorized capital was increased from INR 11 billion to INR 62 billion as part of the rescue plan, the promoter’s stake in Yes Bank was diluted down to 1.4% as of March 31, 2020, and 0.0% as of March 31, 2021 (Gupta, forthcoming-a). (For details on the capital infusion and the changes in shareholding in Yes Bank, see Gupta, forthcoming-a.)
Figure 3: Yes Bank’s Balance Sheet Before and After Implementing the RBI’s Restructuring Plan
A) One year before the restructuring plan
B) After the restructuring plan
Source: YESB 2020a.
Treatment of Creditors and Equity Holders1
As per the restructuring plan, Yes Bank issued 10 billion equity shares at INR 2 per share face value. As shown in Figure 3, this led to an increase in the share capital of the bank from INR 5 billion on March 31, 2019, to INR 25 billion on March 31, 2020. The SBI and the new investors completed a capital infusion by purchasing shares at INR 10 per share (YESB 2020a). All new and existing investors (more than 100 shares) in Yes Bank were required to maintain 75% of their shareholding for three years from the date of the restructuring plan (MoF 2020b).
All deposits of Yes Bank did not subject any losses and had withdrawal limits during the moratorium period as stated by the rescue plan (RBI 2020d). Depositors had withdrawal limits and creditors had payment limits in place of INR 50,000 per account during the moratorium period that was introduced on March 5, 2020, and ended on March 18, 2020 (MoF 2020b; RBI 2020a). The final plan provided for exceptions to allow withdrawals over the specific limits, including medical costs, higher education, marriage, and various emergencies. Yes Bank was allowed to continue to utilize its account at the RBI, pay loans granted against government debt to any bank, and release securities that may have been pledged, mortgaged or rehypothecated (MoF 2020a). The moratorium, and the resulting withdrawal limits, ended on March 18, 2020, as per the final restructuring plan (MoF 2020b).
The RBI’s draft plan on March 6, 2020, required the permanent write down of the Additional Tier I (AT1) capital issued by Yes Bank (RBI 2020d). On March 14, 2020, Yes Bank was following legal advice and had fully written down AT1 bonds worth INR 84 billion (see Figure 1) (YESB 2020a). This action by Yes Bank is being challenged by the AT1 bond investors and Axis Trustee Services Ltd. in the Bombay High Court and Madras High Court (YESB 2020a). For details on the AT1 write-down, see Key Design Decision No. 7, Treatment of Creditors and Equity Holders, in Gupta, forthcoming-a.
Treatment of Clients1
The RBI’s rescue plan ensured the continuation of all of Yes Bank’s preexisting agreements, bonds, and contracts without any change. All liabilities of Yes Bank, including deposits, were to remain unaffected by the rescue plan, unless explicitly stated (RBI 2020d). There was no other disclosed special treatment for clients of Yes Bank.
Treatment of Assets1
There was no explicit plan for asset sales disclosed in the final restructuring plan for Yes Bank. No new asset management vehicle was created to resolve Yes Bank.
In July 2022, JC Flowers Asset Reconstruction Limited (JCF-ARC) agreed to purchase a stressed loan pool from Yes Bank for INR 480 billion through a Swiss bidding process (YESB 2023a). As per this bidding process proposed by the RBI, the highest bid from the first round becomes the base price for bidders in the second round (MC 2022). Yes Bank also acquired a 9.9% stake in JCF-ARC, and applied to the RBI for permission to increase their holding to 19.9% (YESB 2023a).
Treatment of Board and Management1
As discussed in Key Design Decision No. 5, Governance, the RBI replaced the board of directors of Yes Bank on March 5, 2020, to restore the faith of depositors in the bank while a restructuring plan was being formulated (RBI 2020b).
On March 6, 2020, Yes Bank confirmed the appointment of Prashant Kumar, former CFO of SBI, as its administrator by the RBI as per Section 36ACA(2) of the Banking Regulation Act, 1949 (PTI 2020). The new board was to comprise of a minimum of 6 seats: (i) CEO and managing director; (ii) nonexecutive chairman; (iii) two nonexecutive directors; (iv) two directors. The SBI as lead investor bank nominated two directors to the reconstructed board of Yes Bank (RBI 2020d). The RBI reserved the ability to nominate additional directors to the board for oversight as per sub-section (1) of Section 36AB of the Banking Regulation Act, 1949. The new board was to continue for one year until Yes Bank was able to construct a new board based on its existing Articles of Association (RBI 2020d).
On March 20, 2020, the RBI appointed two additional directors to Yes Bank’s board—R. Gandhi (former deputy governor) and A.N. Gopalakrishnan (associate professor)—for an effective period of two years, with the decision going into effect on March 26, 2020 (RBI 2020e). Excluding Prashant Kumar as CEO, the RBI and SBI nominated two directors each to Yes Bank’s reconstructed board in 2020; the remaining three directors served in nonexecutive roles (YESB 2020a).
Rana Kapoor, the founder of Yes Bank, was arrested in March 2020 by the Enforcement Directorate (ED), which is a federal law enforcement body for economic and foreign exchange-related crimes as a subsidiary of the MoF. In July 2020, the ED froze assets of Kapoor worth INR 14 billion, including luxury cars, jewelry, and high-end properties across Delhi and Mumbai. The ED estimated that his crimes could exceed INR 50 billion, including embezzlement of funds, abuse of power, and kickback of funds from corporate borrowers (Jagannath 2020). The case Rana Kapoor vs Directorate of Enforcement began in November 2022; Kapoor is being charged by the ED under sections 44 and 45 of the Prevention of Money Laundering Act, 2002. Kapoor is also being charged by the Central Bureau of Investigation (CBI) separately for INR 6 billion of alleged fraudulent transfers to a non-bank (DHC 2022). As of December 2023, Kapoor was granted bail by a special court in Mumbai in relation to the money laundering charges by the ED but remained in custody pending the CBI investigation (Samervel 2023).
Cross-Border Cooperation1
India was only country to present and to participate in Yes Bank’s restructuring plan.
Other Conditions1
There were no other associated restrictions (dividend or compensation) on the capital infusion as disclosed by the RBI’s restructuring plan.
Duration1
The lock-in period for Yes Bank’s restructuring plan ended and the eight financial institutions that participated in the capital infusion had secured 70% returns on the market value of their investment in three years (Gopakumar 2023). The lock-in period did not apply to any shareholders with less than 100 shares (MoF 2020b). Lead investor SBI's shareholding in Yes Bank was reduced to 26.14%, after Yes Bank raised equity capital from Carlyle and Advent in 2022. The RBI has asked the private bank group to sell down their stakes in Yes Bank gradually to ensure stability in the bank (Gopakumar 2023).
Key Program Documents
(MoF 2020a) Ministry of Finance (MoF). 2020a. “Banking Division Notification - Extraordinary.” The Gazette of India. CG-DL-E-05032020-216550, March 5, 2020.
Official disclosure presenting Yes Bank’s rescue plan by India’s Ministry of Finance.
(MoF 2020b) Ministry of Finance (MoF). 2020b. “Department of Financial Services - Notification.” The Gazette of India. G.S.R. 174(E), March 13, 2020.
Official disclosure presenting Yes Bank’s rescue plan by India’s Ministry of Finance.
(RBI 2020a) Reserve Bank of India (RBI). 2020a. “Draft ‘Yes Bank Ltd. Reconstruction Scheme, 2020’.” March 5, 2020.
Document presenting the RBI’s draft of the rescue plan for Yes Bank.
(RBI 2020b) Reserve Bank of India (RBI). 2020b. “Supersession of the Board of Directors - Appointment of Administrator - Yes Bank Ltd.” March 5, 2020.
Document disclosing the removal of Yes Bank’s board by the RBI.
(RBI 2020c) Reserve Bank of India (RBI). 2020c. “Yes Bank Ltd. Placed under Moratorium.” March 5, 2020.
Document disclosing the decision to place Yes Bank in moratorium.
(RBI 2020d) Reserve Bank of India (RBI). 2020d. “Yes Bank Ltd.: RBI Announces Scheme of Reconstruction.” March 6, 2020.
Document disclosing the RBI’s draft rescue plan for Yes Bank.
(RBI 2020e) Reserve Bank of India (RBI). 2020e. “Reserve Bank Appoints Additional Directors on the Board of Yes Bank Ltd.,” March 20, 2020.
Document disclosing the appointment of new directors to the board of Yes Bank by the RBI.
Key Program Documents
(DHC 2022) Delhi High Court (DHC). 2022. “Rana Kapoor vs Directorate of Enforcement.” 2022/DHC/005170, November 25, 2022.
Document presenting the official case filed in the Delhi High Court by Federal Law Enforcement Authorities against Yes Bank’s founder.
(Jha and Chawla 2023) Jha, Abhijnan, and Chetan Chawla. 2023. “The Limits to a Moratorium: Interplay Between the Indian Insolvency and Bankruptcy Code and Defensive Proceedings.” February 1, 2023.
Document describing the moratorium in the Indian legal context.
(Panday 2023) Panday, Ashish. 2023. “Interpretation of Parallel Proceedings during Moratorium under IBC.” May 3, 2023.
Article by a lawyer at the Delhi High Court explaining the term moratorium under the Insolvency and Bankruptcy Code 2016.
Key Program Documents
(Bhaskar 2018) Bhaskar, Utpal. 2018. “Why RBI Said No to Yes Bank on Rana Kapoor Extension.” Mint, October 29, 2018.
Article describing the RBI’s reasons for not approving an extension to the tenure as CEO of Yes Bank’s founder.
(BS 2015) Business Standard (BS). 2015. “Yes Bank Takes on UBS over Negative Report.” July 14, 2015.
Article presenting the asset quality concerns of Yes Bank’s balance sheet.
(IBC Laws 2023) IBC Laws. 2023. “All about Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 Including Judicial Announcements.” June 13, 2023.
Blog post explaining the idea of a moratorium in the Indian legal context.
(Dave and Shukla 2020) Dave, Sachin, and Saloni Shukla. 2020. “Yes Bank Lines up Rs 30,000 Crore to Meet Deposit Withdrawals.” Economic Times, March 18, 2020.
Article describing news of the provision of bulk deposits to Yes Bank.
(Dhasmana 2020) Dhasmana, Indivjal. 2020. “CBDT Exempts Yes Bank Investors under Reconstruction Scheme from Income Tax.” Business Standard, June 30, 2020.
Article describing a special clause in the rescue plan which exempted new investors from capital gains tax.
(Dubey 2020) Dubey, Navneet. 2020. “Deposits with Yes Bank Insured up to Rs 5 Lakh but What Should Salary Account Holders Do?” The Economic Times, March 6, 2020.
Article describing the increase in deposit insurance to INR 500,000.
(ET 2020a) Economic Times (ET). 2020. “Prashant Kumar Takes Charge as Yes Bank Administrator,” March 6, 2020.
Article confirming the appointment of an interim administrator to Yes Bank.
(ET 2020b) Economic Times (ET). 2020. “Union Cabinet Approves Yes Bank Reconstruction Plan.” Economic Times, March 14, 2020.
Article describing the Ministry of Finance’s announcement of a rescue plan for Yes Bank.
(Express Web Desk 2020) Express Web Desk. 2020. “Yes Bank Fiasco Part of Financial Mismanagement under BJP Govt’s Watch: P Chidambaram.” The Indian Express, March 7, 2020.
Article describing the reaction of a senior opposition leader’s remarks after the RBI’s moratorium on Yes Bank.
(Fortune 2019) Fortune India (Fortune). 2019. “Ravneet Gill Appointed Yes Bank MD and CEO.” January 24, 2019.
Article describing the appointment of a new CEO to Yes Bank to help clean-up efforts and raise equity capital.
(Ghosh 2020) Ghosh, Shayan. 2020. “Yes Bank Sees Massive Erosion of Savings and Term Deposits.” Mint, March 16, 2020.
Article describing the run on deposits at Yes Bank in the build up to its rescue.
(Gopakumar 2023) Gopakumar, Gopika. 2023. “As Lock-in Expires, Yes Bank Rescuers May Retain Stakes.” Mint, March 8, 2023.
Article describing the behavior of investors in Yes Bank’s rescue plan after the expiration of the lock-in period.
(Jagannath 2020) Jagannath, J. 2020. “Yes Bank Case: ED Attaches Assets Worth INR 2,500 Cr of Rana Kapoor and Wadhawans.” The Mint, July 9, 2020.
Article describing action against the founder of Yes Bank by federal law enforcement authorities.
(MC 2022) Moneycontrol News (MC). 2022. “Yes Bank in Final Stages to Close $1 Billion Fundraise from Carlyle, Advent Post ARC Deal.” July 18, 2022.
Article describing Yes Bank’s potential capital raise from a foreign investor.
(Mint 2020) Mint. 2020. “Yes Bank FPO Issue: Floor Price Fixed at INR 12 per Share.” Live Mint, July 10, 2020.
Article describing a follow up public offering by Yes Bank in July 2020.
(Ohri 2020) Ohri, Nikunj. 2020. “RBI Can Now Reconstruct or Merge a Bank Without Placing It Under Moratorium.” BQ Prime, June 27, 2020.
News report disclosing a change in the RBI’s process for the resolution of banks.
(Parkin 2019a) Parkin, Benjamin. 2019a. “India’s Shadow Banking Crisis Raises Spectre of Contagion.” Financial Times, October 29, 2019.
Article describing the spark of India’s Lehman moment with the collapse of a large nonbank financial lender.
(Parkin 2019b) Parkin, Benjamin. 2019b. “India’s Yes Bank Receives $1.2bn Stake Offer from Foreign Investor.” Financial Times, October 31, 2019.
Article about Yes Bank potentially receiving an equity capital investment.
(Parkin 2019c) Parkin, Benjamin. 2019c. “RBI Says Yes Bank Under-Reported Bad Loans by $457m.” Financial Times, November 20, 2019.
Article describing the faulty reporting of bad loans by Yes Bank.
(PTI 2020) Press Trust of India (PTI). 2020. “Prashant Kumar Takes Charge as Yes Bank Administrator.” March 6, 2020.
Article confirming the appointment of an interim administrator to Yes Bank.
(PTI 2021) Press Trust of India (PTI). 2021. “Yes Bank to Take 2 More Years to Stabilise, Says Former SBI Chief.” Business Standard, October 21, 2021.
Article discussing the release of the former SBI chair’s new book and his comments to the media on Yes Bank’s progress.
(RBI 2020f) Reserve Bank of India (RBI). 2020f. “RBI Governor Shaktikanta Das Speaks to Bloomberg Economics’ Stephanie Flanders.” Interview Transcript, March 3, 2020.
Transcript disclosing the TV interview between the RBI Governor and a Bloomberg journalist.
(Reuters 2022) Reuters. 2022. “India’s RBI Gives Conditional Nod to Carlyle, Advent for Yes Bank Stake Buy.” December 1, 2022.
Article reporting the regulatory approval for foreign equity investment into Yes Bank.
(Samervel 2023) Samervel, Rebecca. 2023. “Rana Kapoor Gets Bail in ED Case but Won’t Walk Free Yet.” Times of India, December 22, 2023.
Article providing an update on the case against the founder of Yes Bank.
(Sen 2022) Sen, Meghna. 2022. “Yes Bank to Sell 10% Stake to Carlyle, Advent for INR 8,898 Crore.” Mint, July 29, 2022.
Article describing the equity capital injection by foreign private equity players into Yes Bank.
(Shetty and Sinha 2020) Shetty, Mayur, and Partha Sinha. 2020. “RBI Taps Private Investors to Take Stakes in Yes Bank.” Times of India, March 12, 2020.
Article describing the RBI’s motivations in designing the rescue plan for Yes Bank.
(Shukla and Rebello 2020) Shukla, Saloni, and Joel Rebello. 2020. “Seven Investors Join SBI to Put over Rs 12,000 Crore into Yes Bank.” Economic Times, March 13, 2020.
Article describing the consortium of investors getting together to provide a capital injection to Yes Bank.
(The Tribune 2020) The Tribune. 2020. “RBI Extends Rs 60,000-Cr Credit Line to Yes Bank.” March 19, 2020.
Article describing the extension of a special liquidity facility by the RBI to Yes Bank.
Key Program Documents
(FDIC 2022) Federal Deposit Insurance Corporation (FDIC). 2022. “Receivership Management Program.” February 8, 2022.
Document describing the receivership process by the FDIC.
(RBI 2020g) Reserve Bank of India (RBI). 2020g. “Deposit Insurance and Credit Guarantee Corporation (DICGC) Increases the Insurance Coverage for Depositors in All Insured Banks to Rs 5 Lakh.” Press release, February 4, 2020.
Press release disclosing the increase in deposit insurance by the RBI.
(RBI 2021a) Reserve Bank of India (RBI). 2021. “RBI Releases 2020 List of Domestic Systemically Important Banks (D-SIBs) 2020.” Press release, January 19, 2021.
Disclosure presenting the list of large, systemically important banks in India.
(RBI 2021b) Reserve Bank of India (RBI). 2023. “List of Agency Banks of RBI as on December 6, 2021.”
Document presenting the list of licensed banks by the RBI.
(YESB 2020b) YES Bank Limited (YESB). 2020b. Press release, March 14, 2020.
Press release disclosing Yes Bank’s quarterly numbers after the special action by the RBI.
Key Program Documents
(Das 2020) Das, Shaktikanta. 2020. “Indian Economy at a Crossroad: A View from Financial Stability Angle.” Speech, July 11, 2020.
Speech by Governor Das on financial stability.
(Kotak 2017) Kotak Institutional Equities Research (Kotak). 2017. “Yes Bank: All about a Table, Once More,” October 22, 2017.
Report describing Kotak Research’s view on Yes Bank’s performance.
(Moody’s 2020) Moody’s Investor Service (Moody’s). 2020. “Moody’s Announces Completion of a Periodic Review of Ratings of Yes Bank Limited.” October 16, 2020.
Report presenting the latest credit rating for Yes Bank and its rationale by Moody’s.
(Moody’s 2022) Moody’s Investor Service (Moody’s). 2022. “Moody’s Upgrades Yes Bank’s Rating to Ba3 from B2; Changes Outlook to Stable.” August 4, 2022.
Report presenting the latest credit rating for Yes Bank and its rationale by Moody’s.
(MS 2020) Morgan Stanley (MS). 2020. “Yes Bank: F4Q20 Conference Call Takeaways.” May 11, 2020.
Report by the brokerage division of Morgan Stanley on Yes Bank’s performance in the fourth quarter of 2020.
(PRS India 2020) PRS India. 2020. “The Banking Regulation (Amendment) Ordinance, 2020.” June 29, 2020.
Article presenting the amendments to India’s Banking Regulation Act, 1949.
(SBI 2021) State Bank of India (SBI). 2021. Annual Report 2020-2021.
State Bank of India’s annual report for the financial year 2021.
(SBI 2022) State Bank of India (SBI). 2022. Annual Report 2021-2022.
State Bank of India’s annual report for the financial year 2022.
(TGE 2020) TheGlobalEconomy.com (TGE). 2020. “Bank Assets to GDP - Country Rankings.” Accessed November 11, 2023.
Page providing the business and economic data for 200 economies.
(YESB 2019) YES Bank Limited (YESB). 2019. Annual Report 2018-2019.
Yes Bank’s annual report for the financial year 2019.
(YESB 2020a) YES Bank Limited (YESB). 2020a. Annual Report 2019-2020.
Yes Bank’s annual report for the financial year 2020.
(YESB 2021) YES Bank Limited (YESB). 2021. Annual Report 2020-2021.
Yes Bank’s annual report for the financial year 2021.
(YESB 2022) YES Bank Limited (YESB). 2022. Annual Report 2021-2022.
Yes Bank’s annual report for the financial year 2022.
(YESB 2023a) YES Bank Limited (YESB). 2023a. Annual Report 2022-2023.
Yes Bank’s annual report for the financial year 2023.
(YESB 2023b) YES Bank Limited (YESB). 2023b. “Investor Presentation,” June 11, 2023.
Disclosure presenting an update to investors of Yes Bank.
(YESB 2024) Yes Bank Limited (YESB). 2024. “Intimation under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.” February 6, 2024.
Report disclosing the approval of the purchase of a stake in Yes Bank by the RBI to HDFC Bank.
Key Program Documents
(Akhtar, Alam, and Khan 2021) Akhtar, Shakeb, Mahfooz Alam, and Mohd Mohsin Khan. 2021. “Yes Bank Fiasco: Arrogance or Negligence.” Emerging Economies Cases Journal 3, no. 2, 95-102.
Study assessing the collapse of Yes Bank, its causes, and the regulatory response.
(Bandyopadhyay 2020) Bandyopadhyay, Tamal. 2020. Pandemonium: The Great Indian Banking Tragedy. The Lotus Collection, New Delhi, Roli Books.
Book written by one of India’s leading banking and finance journalists on the travails of the Indian banking system over the past few years.
(Deb 2021) Deb, Rajat. 2021. “Yes Bank Fiasco: A Corporate Governance Failure.” Decision 48, no. 2, 181–90, April 27, 2021.
Study assessing the reasons for failure of Yes Bank and the resulting regulatory response.
(Gupta, forthcoming-a) Gupta, Salil. Forthcoming-a. “India: Yes Bank Capital Injection, 2020.” Journal of Financial Crises.
YPFS case study examining the ad hoc capital injection provided to Yes Bank by a bank consortium.
(Gupta, forthcoming-b) Gupta, Salil. Forthcoming b. “India: Yes Bank Moratorium, 2020.” Journal of Financial Crises.
YPFS case study examining moratorium assigned to Yes Bank by Indian regulators.
(Kumar 2021) Kumar, Rajnish. 2021. The Custodian of Trust: A Banker’s Memoir. Penguin Random House India.
Memoir of the former chairman of SBI from 2017 to 2020.
(McNamara et al. 2024) McNamara, Christian M., Carey K. Mott, Salil Gupta, Greg Feldberg, and Andrew Metrick. 2024. “Survey of Resolution and Restructuring in Europe, Pre- and Post-BRRD.” Journal of Financial Crises 6, no. 1, 1-34, 2024.
Survey of YPFS case studies examining 21st-century bank resolutions and restructurings in Europe before and after the existence of the Bank Recovery and Resolution Directive.
(Ramachandran and Ramesh 2020) Ramachandran, J., and Savithran Ramesh. 2020. “Yes Bank Limited: Too Big to Fail?” Indian Institute of Management Bangalore, September 15, 2020.
Study discussing the rapid growth of Yes Bank and assessing the regulatory response to its rescue.
(Ramchandani and Jethwani 2021) Ramchandani, Kumar, and Kinjal Jethwani. 2021. “Yes Bank: An Untold Story.” Emerald Emerging Markets Case Studies 11, no. 1, 1-7, 2021.
Study concluding risk and aggression as the most important aspects of Yes Bank’s culture before its rescue, from one of the most promising banks in India.
Appendixes
Appendix A: Timeline for Yes Bank
Source: Bhaskhar 2018; BS 2015; BT 2020; ET 2020a; Fortune 2019; Ghosh 2020a; Kotak 2017; Mint 2019; Moody’s 2020; Moody’s 2022; Parkin 2019b; Parkin 2020; YESB 2020a; YESB 2021b; YESB 2022d; YESB 2023a; author’s analysis.
Appendix B: Moratorium in India
A moratorium in India is similar to receivership in the U.S., in that the troubled financial institution is protected to maximize value of the assets of the institution in an orderly manner. The legal frameworks for imposing both programs are dependent on the bank resolution regulations and laws in each respective country.
The term “moratorium” has been used increasingly since the adoption of the Insolvency and Bankruptcy Code (IBC) in 2016 (IBC Laws 2023). Matters that require a moratorium are provided in Section 14 of the IBC 2016 (IBC Laws 2023). The moratorium refers to a period during which judicial proceedings, sales of assets, or termination of essential contracts may not be initiated against an institution (IBC Laws 2023). India’s judicial courts have stated that the imposition of a moratorium is to protect the debtor, in an attempt to preserve and maximize the values of its assets (Jha and Chawla 2023). The regulating authority can impose a moratorium as per section 13(1)(a) of the IBC 2016 (IBC Laws 2023).
India’s Insolvency Law Committee clarified the following in February 2020:
The idea of a moratorium is that it facilitates the continued operation of the business of the corporate debtor to allow it breathing space to organize its affairs so that a new management may ultimately take over and bring the corporate debtor out of financial sickness, this benefiting all stakeholders, which would include workmen of the corporate debtor (Panday 2023).
The Federal Deposit Insurance Corporation (FDIC) in the U.S. is the appointed regulator to manage the orderly and expeditious disposal of assets, with the goal of maximizing the net return, for a failing financial institution (FDIC 2022). The FDIC bears the responsibility of distributing funds to the creditors of the institution in receivership after a sale of assets and settlement of claims (FDIC 2022).
Taxonomy
Intervention Categories:
- Resolution
Institutions:
- Yes Bank
Countries and Regions:
- India
Crises:
- India 2018-2020 Crisis