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Old 9th March 2020, 14:06   #61
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News update, hopefully
SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed-1583742949511.jpg
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Old 9th March 2020, 14:24   #62
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Default Re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

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News update.......
That's good news. Now that the public is in panic, I am wondering what will happen when RBI lifts the cap and all depositors queue up to withdraw their entire balance? Wouldn't that trigger another liquidity crisis leading to further collapse? Unless SBI is infusing a capital sum equal to all the deposits, in which case it would be suicidal for SBI
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Old 9th March 2020, 14:37   #63
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Default Re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

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That's good news. Now that the public is in panic, I am wondering what will happen when RBI lifts the cap and all depositors queue up to withdraw their entire balance? Wouldn't that trigger another liquidity crisis leading to further collapse? Unless SBI is infusing a capital sum equal to all the deposits, in which case it would be suicidal for SBI
The Govt is very clear that they wont let Yes Bank fail. As a Govt they cannot afford it. SBI & its consortium do not need to invest 100% of the fixed deposits/ savings deposits. Maybe 10%. The system runs on confidence. No bank carries cash equal to 100% of deposits ever - it simply wont be able to function. The public and some news sites are carrying the impression that this was a collapse. Not so. The Govt realized where this bank with Shri Rana Kapoor was headed which is why the RBI changed the CEO and a part of the Board proactively last year. They were then trying to close an equity infusion by private investors which twice or thrice collapsed at the nth moment allegedly due to some poking around by Rana Kapoor & Co. SBI was always the Govt's Plan B. Certain circumstances propelled the Govt to put plan B in action which included this temporary restriction and the arrest of Rana Kapoor. At least that is my understanding of what's going on.
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Old 9th March 2020, 14:41   #64
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Default Re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

Personally I feel more govt / regulatory controls are not the answer. A body approving all loans would mean corrupt borrowers get thier loans passed, while "files" of deserving borrowers languish. With absolute power, comes absolute corruption.

Harsh controls could also mean that Banks get too risk averse and stop lending to SMEs / small entrepreneurs entirely. We had seen a "decision paralysis" with PSU Banks last year, where managers stopped all sanctions beyond a size, out of fear of getting investigated. A lot of good businesses suffered due to this.

I don't think any of us who grew up in the 70s & 80s, would want to go back to the license raj days. But the cost of "freedom" (free markets) means the occasional Yes Bank will happen. The test for system is how it handles it. Certainly, YesBank could have been handled better - 50K a month withdrawal limit can be ruinous for folks in emergencies. But at least Depositors will get their money back.
While shareholders (incl the promoters) will loose major value; as it should be - equity-holders must bear consequences, not depositors.

What we need is for Banks to get a special credit / strength rating, under an RBI-supervised framework. It should be prominently displayed at branches, bank statements and all marketing collateral. So depositors will have a choice between high interest deposits in riskier banks and low-interest deposits in conservative banks. Banks will also get rewarded for lowering risk.

Financially savvy depositors already such calls; a "rating" system would enable common man to do the same. Basically, a GNCAP for Banks!
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Old 9th March 2020, 14:42   #65
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Default Re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

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Originally Posted by V.Narayan View Post
The Govt is very clear that they wont let Yes Bank fail. As a Govt they cannot afford it. SBI & its consortium do not need to invest 100% of the fixed deposits/ savings deposits. Maybe 10%. The system runs on confidence. No bank carries cash equal to 100% of deposits ever - it simply wont be able to function.
Thanks for the explanation sir. I completely agree with your views. Looking at the way media has portrayed this whole episode and the almost out of the blue decision by RBI to impose a moratorium has severely impacted the public's confidence in this bank. Most of them (me included) are eager to transfer their entire balance to a PSU or some other solid bank as soon as the moratorium is lifted. This is why I was worried about further collapse.
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Old 9th March 2020, 14:56   #66
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Default Re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

My sympathies with all Yes Bank depositors. We are all so used to transacting through banks that a collapse like this shakes our faith in the entire system. I have often wondered at the alternatives to parking money in banks.

Truth be said other options arent much safer or more liquid. The latter is especially important in a crunch. Reminds me of my grandparents' generation who believed in only two asset classes - Land & Gold. Probably we are headed in that direction.
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Old 9th March 2020, 16:13   #67
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Default Re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

If you trade intraday, yes bank has over Rs 4 today. Makes sense to trade and earn some money.
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Old 9th March 2020, 16:22   #68
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Well, another bailout at the cost of the tax payer (and perhaps the correct option). The problem has being festering for more than a year... one only wonders if RBI is more reactionary than proactive in detecting these kind of loop holes.
Granted thieves will always find ways to game the system, but effectiveness of RBI needs to be questioned given the background of multiple mis-governance and frauds occurring in the banking system.

Given a situation where a lay investor is assured of return of deposit; then would they not prefer an aggressive bank (like Yes Bank) over a more conservative bank (say HDFC). So, are is the incentive being given for a risk taker at the cost of tax payer's money?
Do not want to spark political debate here but there are always 3 guys party in any kind of scam/bailout, specially in India;

1# Local/National political person/party which needed fund,

2# A Business man who facilities it by having it's cut and

3# A Bank employee/s who executes transaction (and received his/her share).

If any 1 of these 3 disagrees, such situation does not happen at this magnitude.

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If you trade intraday, yes bank has over Rs 4 today. Makes sense to trade and earn some money.
Yes, but it is too risky. Intraday should be done with solid stocks only. Less gain but less pain. Just look at RBL bank, it tanked over 100 Rs in just 3 trading days.

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Old 9th March 2020, 16:42   #69
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Default Re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

With the way SBI is asked to step in to save other banks, I'm scared. So much for a "Cashless" India. With banks failing we'll all be "cashless" in no time. The small bank start ups really are going to find it tough. One young client came to me and asked if I had heard of Equitas Bank, I said no then he went on to explain that it was a newly started bank and asked me to open an account in the bank, in my mind I was smiling and thinking: Fat Chance!!
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Old 9th March 2020, 16:53   #70
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Default Re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

Its interesting. If RBI had a fail safe/plan B in place then why the shock of moratorium ? Something is fishy and i have been scanning through multiple tweets etc to get an understanding.

The communication plan/execution was really poor. Why can't you prepare the plan, then give a nice polished announcement that "hey fund raising through market/investors is not happening (which is known info) so our plan B (which is the surprise) is in place. SBI will invest x% and so on. At least that would have reduced the panic and people rushing to ATM's to withdraw money ? And did they even do a risk analysis of the impact of such announcement ? Like phonePe and other payment apps getting stuck etc ?

And while Rana Kapoor is in custody etc. why there is no plan to recover dues from the main defaulters ? They had RBI rep on board, even about a year back i read that everything is okay with Yes Bank and the fund infusion is needed for growth and nothing else is worrisome..

Last edited by sunishsamuel : 9th March 2020 at 16:54.
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Old 9th March 2020, 19:57   #71
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Default Re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

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Its interesting. If RBI had a fail safe/plan B in place then why the shock of moratorium ? Something is fishy and i have been scanning through multiple tweets etc to get an understanding.

The communication plan/execution was really poor. Why can't you prepare the plan, then give a nice polished announcement that "hey fund raising through market/investors is not happening (which is known info) so our plan B (which is the surprise) is in place. SBI will invest x% and so on. At least that would have reduced the panic and people rushing to ATM's to withdraw money ? And did they even do a risk analysis of the impact of such announcement ? Like phonePe and other payment apps getting stuck etc ?..
I completely agree that RBI has messed up the communication big time. They could've gracefully handled the situation by bringing in some PSBs and other investors in before making any announcement.

Now they have shattered all confidence in Yesbank. No depositor is going to continue banking with Yesbank and there will be a massive flight of deposits the day the moratorium is lifted. Which only means that the moratorium is here to stay for a long time till Yesbank is merged into a larger bank.

So much for the wisdom of our top bankers.
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Old 9th March 2020, 20:20   #72
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Default Re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

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I am also a firm believer of the "free market" principle.

In these cases, the cost of "saving" a damaged company is far lesser than the direct + indirect cost of letting it die.
I understand where you are coming from in this argument. I personally believe a government should never get involved in propping up any private company, irrespective of the potential damage to the economy. The problem is this encourages bad behaviour, in the knowledge that the government will bail you out. Take the American car companies for example. How many of them are realistically a force on the global market. The Japanese, Koreans and the Germans rule. No doubt these countries also support their companies, but at least they are world class. No American car company has world class products.
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Old 9th March 2020, 21:55   #73
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Default Re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

The biggest losers, after customers, are the mutual funds and retail investors who bought shares of this company. SEBI is ineffictive against preventing any frauds. Ruchi Soya, Jet, Yes Bank all were companies recommended by the most reputed analysts from ICICI, KOTAK etc earlier.

No one tells retail investors when to get out, and many who do not spend a few hours daily to look at the news won't even know that India's 4th largest bank was being fraudulent.

The 50% + taxes that people pay in India (Including GST @18+%, fuel taxes and income tax) on their meager incomes do not justify any services that this government provides. Roads are laid for through a separate toll and road tax. Medical care is fully private. Even premier education institutes don't offer good scharships anymore. All we see are fancy ads almost every week about some government scheme with smiling faces of (fake) happy citizens costing crores. For example, 56% of the budget for a critical social scheme was spent on advertising recently.

The PM of this country attended a conference recently which had Yes Bank as a title sponsor. No where else in the world could this have happened.

No wonder that the economy is in distress. With such abysmal levels of regulation, distressed consumers and terrible legal processes (not one of the fruadsters like Nirav Modi, Mallya etc. who destroyed PNB etc. have been caught), consumers who are not into old money are likely to save and wait for better times. Every time something like this happens, the folks in the current government blame the previous ones and wash their hands off. Retail investors who bought into A rated mutual funds which invested mutual funds with such companies in the portfolio because savings rates were being cut are left in the lurch.

Those who are blaming depositors and shareholders for being fools and not looking at news, please understand thst as early as January this year even the reputed CNBC type media houses were upbeat about this company and its fund infusion prospects. Normal people are not privy to the insider info that lawyers and others have.
But of course, talking about this is not in the national interest anymore.

Last edited by Nissan1180 : 9th March 2020 at 22:05.
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Old 9th March 2020, 22:39   #74
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Default Re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

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Originally Posted by nagr22 View Post
Thanks for the explanation sir. I completely agree with your views. Looking at the way media has portrayed this whole episode and the almost out of the blue decision by RBI to impose a moratorium has severely impacted the public's confidence in this bank. Most of them (me included) are eager to transfer their entire balance to a PSU or some other solid bank as soon as the moratorium is lifted. This is why I was worried about further collapse.
I am no expert but I strongly doubt the RBI will place a limit on people withdrawing and exiting. The RBI may more administrative practicality require large deposit holders to spread their withdrawals over say 180 days but most individual citizens will be much below that threshold.

SBI is a listed company. RBI could not simply commandeer it with out first making public that Yes Bank is in trouble and the RBI needs to put in place its Plan B to save YB.

What I would like to see is a few people serving long term prison sentences - Rana Kapoor and some of his family members who were hand in glove plus a few industrialists who sucked out loans with both sides knowing they'd go bad or were meant to go bad. After their goofies with Vijay Mallaya and Nirav Modi this Govt will do it self a favour by acting this time on Yes Bank and ILFS.

Last edited by V.Narayan : 9th March 2020 at 22:51.
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Old 10th March 2020, 01:39   #75
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Default Re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

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The biggest losers, after customers, are the mutual funds and retail investors who bought shares of this company.
The biggest loser is the taxpayer. Customers and perpetual bond holders were depositing money for higher interest earnings, mutual funds and retail investors of shares should have researched better and made an exit, but they were trying to make money out of it. The promoter of Yes Bank who had famously said that he would not sell a single share sold his entire stake in november 2019. That should have sent the alarm bells ringing.

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For example, 56% of the budget for a critical social scheme was spent on advertising recently.
The said scheme is a public awareness campaign that requires communication as a strategy to enable public discourse hence the expenditure on advertising.

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The PM of this country attended a conference recently which had Yes Bank as a title sponsor. No where else in the world could this have happened.
The PM was invited by a business news entity. It was not a government programme.

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Those who are blaming depositors and shareholders for being fools
My best wishes are with the depositors and I hope they get access to their complete funds soon. The shareholders very well knew what are the risks of investing in stock market and should have done due diligence.
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