Prudence that wiped 16K cr of YES investors' wealth

The negative sentiment against the YES' stock emancipated out of the fact that the bank reported massive losses in its Q4 earnings call, on the back of increased provisions. Reuters file photo

On Tuesday, the scrips of India's fourth largest private sector bank got beating on exchanges, on back of the negative sentiment, as the bank reported of Rs 1,500 crore worth of losses in the Q4 earnings calls.

In the mayhem, which saw stocks of the bank tanking by 29.23% during the day's trade in the Bombay Stock Exchange, saw Rs 16,066 crore of the investors' wealth parked in the YES Bank being wiped off. It also hit the fortunes of the promoters of the bank -- including founders Rana Kapoor and Madhu Kapur -- become poorer by a whopping Rs 3,181 crore.

The negative sentiment against the YES' stock emancipated out of the fact that the bank reported massive losses in its Q4 earnings call, on the back of increased provisions.

The bank has reported gross slippages of Rs 3,481 Crores in Q4FY19 of which Rs 552 Crores was on account of an 'airline company' exposure that was performing as on March 31, 2019, and Rs 529 Crores on account of stressed infrastructure conglomerate.

Though the bank didn't name the two stressed assets in the filings, the sources in the know said that the airline company referred in the filing is Jet Airways, while the stressed stressed infrastructure conglomerate is IL&FS. 

The bank had no compulsion to create any kind of provision for Jet Airways, as on date. However, following the principles of good governance, in which banks try to defer calling out bad debt as much as possible, YES Bank decided to create a pre-emotive provision for the Jet account. 

"The tried to be saints in the industry, and they lost the money. I guess, there is no place for the good governance in the Indian markets," a market analyst, wishing anonymity, told DH.

This is not the first time that Indian markets have behaved in a way that is seen contradictory to the principles of good governance. After the exit of former Reserve Bank of India (RBI) governor Urjit Patel, who was seen very strict enforcer of laws in the banking system, the markets celebrated by the way of a huge rally.

 

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