The plight of the Modi government's economy, from bad loans to financial thrills, as well as negligence from the RBI are the reasons that led to the collapse of Yes Bank - India's fourth-largest private bank.
Why did YES Bank collapse and who is responsible for it? We are going to tell you about this. From the bad debt scheme to the plight of the Modi government's economy as well as the RBI's negligence are the biggest reasons for its downfall and we will tell you about them.
1. Bad Debt in Indian Banking Sector
The first and most important reason for the fall of Yes Bank is bad loans. According to banking experts, YES Bank has given loans especially to those who have lost money. Instead of a high-interest rate, the bank has given a loan of Rs 3 lakh crore over a decade. It was offering easy loans to IL&FS, Dewan Housing, Jet Airways, Cox & Kings, CG Power Cafe Coffee Day companies. Most of these companies have registered negative growth in recent years.
2. Modi government shattered the economy
As the former finance minister P Chidambaram said, the Modi government's plight of the economy is also responsible for the downfall of the bank, which was set up a few years ago as a success story of rising private banking in India. After PMC, it is the second major bank which has recently collapsed.
The importance of Chidambaram's statement is considered as analysts believe that RBI members who were part of the bank's board of directors ignored the problem for a long time and did not ring the alarm bell on time.
3. The policy of financial lapses adopted by the bank
Banking experts believe that to generate profit through a high-interest rate, the bank lends money on easy terms without examining the financial health of the companies.
Experts believe that the bank was doing loan deals directly with promoters without a consortium which initially proved to be a low and easy way to make a profit but eventually led to the bank's downfall.
4. Bank governance - a serious issue
Analysts believe the bank has not collapsed overnight. It took three-four years to show the tension the bank was going through, especially after the PMC bank crisis, it was almost decided that the bank would sink. However, neither the directors of the bank nor the management or RBI tried to revive the bank. Yes, Bank's trouble only worsened when the economic cycle deteriorated and the government announced demonetization.
The founder of the bank, Rana Kapoor has been one of the most prominent voices, who supported this performance. Analysts believe that the bank's inability to collateral against debt also leads to the crisis.
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