Business Value Analysis at Yes Bank: A Strategic Lesson

Business Value Analysis at Yes Bank: A Strategic Lesson

Vineet Chouhan, Pranav Saraswat
Copyright: © 2021 |Pages: 30
DOI: 10.4018/978-1-7998-7716-5.ch011
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Abstract

This case is related with the biggest 2020 scam by one of the major new private sector banks (i.e., YES bank). The case is related with the misuse of the power of banks in providing the benefits to one person, due to the power and influence granted by the political party leaders that influence providing unlimited loans to one person and further the acts of the bank officials that led to the partial breakdown of the banking system in India. Further, the case deals with the major accused and the shell company's creator as DHFL. The present analysis put lights on the future lessons to be learnt by various sectors in order to prevent heavy losses and loss of customer faith (being the most vital component). It starts by giving a background of the crisis that led the RBI to come into picture. It also shows the effectiveness of the actions of RBI for YES bank. At last, it points out the importance of independent management and the roles of auditors and other regulators in dealing with this crisis.
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Yes Bank Crisis Begins

In 2004, Rana Kapoor and Ashok Kapoor established YES bank. After 2008, Rana Kapoor, the then serving head of YES Bank, had a behaviour of aggressively giving bank loans on a high interest rate to companies which were stressed. Companies like Cafe Coffee Day, DHFL, and Anil Ambani Reliance were unable to pay its loans even though RBI had scrutinized the bank since 2017. There was a repeated lending of loans to high-risk companies, which finally led to increasing NPA.

In April 2019, the bank posted its forecast quarterly loss and in November 2019, Rana Kapoor sold all of his stock for a total of 142 crores. Sensex fell and its stock fell after the rumours of YES bank being sold to SBI. After all these incidents, the shares of the bank fell drastically and there was a Panic in the people who were the bank's customers. The bank’s saga has taken all the attraction to equip the professionalism, probity, and good corporate governance in the banking sector. Even pertinently, the bank could not keep up with its responsibilities. The Board did not work independently of its promoters. Further, the bait for higher interest led to creation of snowball effect (Chouhan et.al., 2021b; Saraswat, 2021; Dadhich et.al., 2019).

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