Why did Yes Bank collapsed: updates and details on the ongoing crisis

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  Why did Yes Bank collapsed: updates and details on the ongoing crisis

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• Yes Bank Limited is an Indian private sector bank founded by Rana Kapoor and Ashok Kapur in 2004. It is involved in retail banking and asset management businesses. Ashok Kapur died in 26/11 terrorist attack in Mumbai. After his death Rana Kapoor tried to not involve family members of Ashok Kapur in business.
• The three largest shareholders of Yes Bank limited were foreign portfolio investors (43%), insurance companies (14%) and mutual funds including UTI (10%). Smaller shareholdings were owned by its three promoters Rana Kapoor, Yes Capital India Pvt. ltd. and Morgan credits pvt. ltd. and other investors including Madhu Kapur (wife of Ashok Kapur) etc. 
• Yes Bank limited operates under three distinct entities – Yes Bank, Yes Capital and Yes Asset Management.
• On March 5, 2020, the Reserve Bank of India (RBI) announced that, in the interest of its customers and depositors, it would suspend and supersede Yes Bank's board and impose a 30-day moratorium on its operations.
• The RBI cited Yes Bank's failures to raise new funding to cover its non-performing assets, inaccurate statements of confidence in its ability to receive new funding, and its underreporting of its non-performing assets, among other factors, as the impetus for this moratorium.
• Customers are being limited from withdrawing more than Rs 50,000 from their accounts, except in certain exceptional circumstances (such as to cover medical care, emergencies, higher education, and "obligatory expenses" for ceremonies such as weddings).
• Finance minister Nirmala Sitharaman announced a draft turnaround plan, under which the State Bank of India would take a 49% stake which would involve Rs. 2400 crore in Yes Bank and introduce a new board.
• On March 06, 2020 ICRA downgrades Yes Bank’s Rs 52,600 core bonds to ‘default’, it said that this rating downgrades factor in the moratorium on the bank and the cap on payments to its depositors.
• On March 08, 2020 Yes Bank Founder Rana Kapoor was arrested by The Enforcement Directorate (ED) in money laundering case.
• Reasons why the RBI superseded the board of Yes Bank - 

1. Deteriorating Financial Position - Its inability to raise capital to address potential loan losses and resultant downgrades, triggering invocation of bond covenants by investors, and withdrawal of deposits hints the same.
2. Governance Issues - The serious governance issues have led to a steady decline of the bank. Take, for instance, the bank under-reported NPAs to the tune of Rs 3,277 crore in 2018-19.
3. False Assurance - The bank management had indicated to the Reserve Bank that it was in talks with various investors and they were likely to be successful but in reality, there was no concrete proposal from investors.
4. Non-serious Investors - The investors to which the bank was engaged with for exploring opportunities to infuse capital in February this year did hold discussions with senior officials of the Reserve Bank but for various reasons eventually did not infuse any capital.
5. Outflow of liquidity - The bank was facing regular outflow of liquidity. It means that the bank was witnessing withdrawal of deposits from customers. In fact, the deposits are bread and butter of a bank. The bank had the deposit book of Rs 2.09 lakh crore at the end of September 2019.

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