Opinion | The Yes Bank rescue offers little comfort
While the plan envisages a coherent equity structure, the lender’s books seem worse than thought and the funds committed inadequate. The episode may set market reforms back
Yes Bank’s latest financial results place the scale of its troubles in sharp relief. The private bank, saving which is an effort that achieved a measure of coherence only on Friday, posted a loss of ₹18,564 crore for the three months ended December, in contrast with a profit of nearly ₹1,002 crore a year earlier. Its bad loans hit ₹40,709 crore, almost a fifth of its total assets, easily exhausting its mandatory capital buffers and some liquidity cushions. In an economy where the collapse of a single private bank could pose a danger to the entire sector’s stability, as judged, that lurch from boom to bust can be held up to justify the state’s drastic intervention of 6 March to enforce an overnight take over of Yes Bank by other banks. At first, the rescue mission looked so wobbly that it suggested a regulatory system caught unaware by the depth of the bank’s crisis. Now that a bailout plan has been notified by the Centre and a date announced for the lifting of curbs on its operations, last week’s frayed nerves have been soothed—but only to an extent.
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