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Introduction

The Yes Bank is an Indian private sector bank, headquartered in Mumbai, catering to retail customers, MSEs, and corporate clients. In 1997–98, three Mumbai-based bankers – Rana Kapoor, Ashok Kapur and Harkirat Singh co-founded Rabo India Finance in partnership with Rabobank of the Netherlands. In early 2003, the three bankers started Yes Bank with proceeds from selling their stakes in Rabo India Finance. In May 2004, Yes Bank obtained a banking license from the Reserve Bank of India (RBI) and opened their first branch in August 2004.

The bank was known to be one of the successful banks in India however was seen struggling for a few years. Yes Bank distinguished itself with aggressive lending practices, targeting sectors like infrastructure, real estate, and medium-to-large enterprises. Its ability to adapt to market trends and focus on digital transformation positioned it as a forward-thinking institution. The bank had established itself as a key player in India’s banking sector, with a reputation for robust financial performance, innovative products, and a commitment to high-growth strategies. The major reasons for the downfall of the bank started with management disputes between Rana Kapoor and Madhu Kapoor (spouse of Ashok Kapur) in the year 2009. This impacted the goodwill of the bank as trouble was sensed on the board of the bank. As the books of the bank were growing questions were simultaneously raised at Rana Kapoor for giving out a large amount of loans to stressed units. These poor banking decisions made by Mr. Kapoor led to an increasing number of NPA’s in the bank. RBI’s also found a divergence in the financials of the bank with respect to NPA’s in the years 2016,2017 and 2019.

 

Background of the Case

Yes Bank’s rise was fueled by aggressive lending practices and a focus on high-growth sectors such as infrastructure, real estate, and non-banking financial companies (NBFCs). While this strategy brought rapid expansion and market prominence, it also exposed the bank to significant risks. In the years leading up to its downfall, Yes Bank’s asset quality began to deteriorate due to its high exposure to risky borrowers, many of whom defaulted on loans.

Despite visible stress in the loan book, the bank continued to show optimism in its financial reporting, delaying the recognition of bad loans. This lack of transparency eroded stakeholder trust. By 2019, mounting non-performing assets (NPAs) and liquidity challenges became apparent, with the bank failing to raise sufficient capital to offset its losses. The situation worsened when depositors started withdrawing funds amid fears of insolvency, triggering a severe liquidity crisis. The Reserve Bank of India (RBI) intervened in March 2020, imposing a moratorium and implementing a restructuring plan to stabilize the bank with the help of SBI, the major stakeholder.

 

Pre Crisis Context (2017 – 2019)

Financial Growth Metrics:

a) By 2017, Yes Bank had established itself as one of India’s top private sector banks, with a market capitalization of approximately $13.4 billion. Its reputation was built on innovative banking solutions and a customer-centric approach, making it a standout player in the industry.

b) The bank’s loan portfolio witnessed aggressive growth:

• FY 2017: ₹1.32 trillion
• FY 2018: ₹1.85 trillion (a 40% year-on-year increase)
• FY 2019: ₹2.41 trillion (a 30% year-on-year increase)

Over two years, Yes Bank’s loan book surged by 80%, a pace that raised serious questions about the sustainability of such rapid expansion in challenging economic environment.

c) The *Net Interest Income (NII) grew significantly, rising from ₹3,900 crore in FY 2017 to ₹7,000 crore in FY 2019, reflecting a 79% increase over two years. This growth underscored Yes Bank’s aggressive lending strategy, driven by substantial exposure to both retail and corporate borrowers.

Asset Quality and Non-Performing Assets (NPAs):

a) The bank’s gross *NPAs surged by 113% in just 18 months, escalating from ₹8,000 crore in March 2018 to ₹17,134 crore in March 2019, alarming investors and regulators.

b) While Yes Bank officially reported NPAs of ₹3,277 crore for FY 2019, subsequent disclosures indicated that actual figures were significantly higher. Analysts pointed to aggressive accounting practices and a lack of transparency, further eroding market trust.

c) Yes Bank had substantial exposure to high-risk sectors that were already under financial stress:

• The real estate sector, which was experiencing a downturn.
• Infrastructure projects, many of which were struggling with financial viability.

Governance and Management Challenges:

a) In September 2018, the Reserve Bank of India (RBI) curtailed CEO Rana Kapoor’s tenure, citing governance concerns. This move triggered a 30% drop in Yes Bank’s stock price, reflecting investor unease over the bank’s leadership and risk management.

b) The governance crisis deepened as several key board members resigned, further unsettling investors. Uttam Prakash Agarwal, an independent director, resigned in January 2020, citing governance failures.

c) Amid rising NPAs and governance lapses, the RBI intensified its oversight, issuing directives aimed at strengthening risk management. However, enforcing compliance proved to be an uphill battle.

Market Reactions and Investor Confidence:

a) Yes Bank’s stock, which traded at around ₹400 per share in early 2018, plummeted to approximately ₹50 by late 2019—a massive erosion of investor wealth and confidence.

b) As financial instability became apparent, depositors started pulling out funds at an alarming rate. Between September and December 2019, deposits fell from ₹2.1 trillion to ₹1.7 trillion—a nearly 19% decline in just three months.

This rapid outflow underscored the mounting distrust among depositors and signaled a deepening crisis.

Crisis Unfolding (March 2020)

Initial Signs of Distress:

a) The bank faced severe liquidity stress due to continuous deposit withdrawals. By March 2020 deposits had plunged by approximately 54%, falling from ₹2.1 trillion in September 2019 to around ₹1.1 trillion—a dramatic loss of depositor confidence.

b) The bank reported massive losses, exacerbating concerns over its stability. In Q3 FY20 alone, Yes Bank posted a staggering ₹18,564 crore (~$2.5 billion) loss, driven by heavy provisioning for bad loans and defaults. The bulk of these losses stemmed from exposure to high-risk corporate loans, particularly in distressed sectors such as power and infrastructure.

Public Reaction and Media Coverage:

a) Customers rushed to withdraw funds, leading to chaotic scenes at bank branches and ATMs.

b) The crisis dominated news cycles, with media outlets highlighting depositor concerns and potential risks to India’s banking sector.

c) Discussions about Yes Bank’s collapse flooded social media platforms, amplifying fears regarding the safety of deposits in Indian
banks.

Causes of the Crisis

a) Aggressive Lending Practices

• The bank aggressively lent to high-risk borrowers, particularly in sectors like real estate, infrastructure, and non-banking financial companies (NBFCs).
• Yes Bank’s loan book surged 80% from ₹1.32 trillion in 2017 to ₹2.41 trillion in 2019, driving its 2020 financial crisis.
• Large corporate accounts such as DHFL, Jet Airways, and IL&FS defaulted, leading to a surge in NPAs.

b) Corporate Governance Failures

• Weak internal controls and allegations of governance lapsed under its founder and former CEO, Rana Kapoor for a long time. Over dependence on a few large borrowers and lack of transparency in financial reporting.
• Yes Bank’s management pursued aggressive lending strategies without adequate risk assessment. By the end of the third quarter of the 2019-2020 financial year, the bank reported a staggering loss of ₹18,564 crore, eroding about 71% of its equity.

c) Liquidity Crunch

• Yes Bank’s dependence on volatile bulk deposits left it vulnerable to sudden withdrawals, causing a liquidity crunch.
• The bank’s Common Equity Tier 1 (CET1) capital ratio dropped to a mere 0.6%, far below the regulatory requirement, highlighting its weakened financial position.

d) Loss of Depositor and Investor Confidence

• The disclosure of financial troubles eroded depositor confidence, leading to a drop in deposits from ₹2.1 trillion to ₹1.7 trillion between September and December 2019.
• Investor trust plummeted as Yes Bank’s bonds were downgraded, causing its stock value to crash by over 85% in 2019, making it difficult to raise new capital.

e) Regulatory Inaction

• Regulators delayed action despite rising NPAs (from 0.31% in FY2014 to 7.39% by 2019) and mass depositor withdrawals, with deposits dropping by ₹40,000 crore in late 2019.
• The RBI imposed a moratorium only in March 2020, capping withdrawals at ₹50,000, necessitating a ₹10,000 crore bailout and amplifying the crisis’ impact.

f) Misreporting of Financial Health

• In 2018-19, Yes Bank underreported NPAs by approximately INR 3,277 crore, masking the true extent of its financial troubles. By December 2019, the gross NPA ratio had surged to 19% of advances.
• The Reserve Bank of India (RBI) conducted an AQR that revealed Yes Bank’s gross NPAs were actually around ₹17,134 crore, significantly higher than the reported figures. This represented a doubling in NPAs over just six months, highlighting severe mismanagement.

Financial Analysis

Pre-Crisis Financial Position:

1. Revenue Growth and ProfitabilityYes Bank adopted an aggressive growth strategy during the pre-crisis period, driving rapid expansion in its NII.a) E bank’s earnings from core lending operations showcased remarkable growth:
   • FY 2017: ₹3,900 crore
   • FY 2018: ₹5,300 crore (36% growth YoY)
   • FY 2019: ₹7,000 crore (32% growth YoY)

   This rapid expansion reflected its growing loan portfolio but hinted at an overreliance on risky lending practices.

   b) Yes Bank’s net profit peaked at ₹4,225 crore in FY 2018, reflecting the success of its lending strategy. However, by FY 2019, profits plummeted by 59% to ₹1,720 crore due to mounting provisions for bad loans.

   c) Despite its growth, the *NIM dropped to 2.5% in FY 2019, falling below the private banking industry average, highlighting inefficiencies in lending operations and cost management.

   d) The bank’s loan portfolio saw an 80% increase over two years, rising from ₹1.32 trillion in FY 2017 to ₹2.41 trillion in FY 2019. While this growth impressed investors initially, it raised concerns over the sustainability of its lending strategy, particularly in a slowing economic environment.

2. Asset Quality
   The aggressive expansion in Yes Bank’s loan book came at the cost of deteriorating asset quality:a) Gross Non-Performing Assets (GNPA):
   • March 2017: ₹1,272 crore (GNPA ratio of 1.28%)
   • March 2018: ₹8,000 crore (GNPA ratio of 3.22%)
   • March 2019: ₹17,134 crore (GNPA ratio of 7.39%)

   This represents a staggering 113% rise in GNPA in just 18 months.

   b) Yes Bank consistently underreported NPAs and maintained a low PCR of 43% in FY 2019, signaling insufficient buffers to absorb potential loan losses.

   c) The bank’s loan exposure was heavily concentrated in high-risk sectors:

   • Real Estate: Suffering from a slowdown during the period.
   • Infrastructure Projects: Many of these ventures faced delayed timelines and financial viability issues.
3. Liquidity and Capital Adequacya) Yes Bank’s *CAR dropped below the RBI’s regulatory requirement of 10.875% in FY 2019, underscoring its inability to withstand financial shocks.b) Deposits grew steadily until FY 2018, peaking at ₹2.27 trillion, before declining to ₹1.7 trillion by late 2019 as depositor confidence eroded.c) Over 60% of its liabilities comprised wholesale funding, which heightened its vulnerability to market sentiment and depositor trust during periods of stress.

Impact on Financial Metrics Post-Crisis:

a) Revenue and Profitability:

Yes Bank’s net interest income plummeted in FY 2020 as loan defaults surged and fresh credit growth stagnated. Total revenue for FY 2020 declined by over 20%. The bank recorded a net loss of ₹16,418 crore in FY 2020—the worst in its history—due to heavy provisioning and bad loan write-offs, particularly in the real estate and infrastructure sectors.

b) Liquidity Position:

By March 2020, deposits had fallen to ₹1.37 trillion, a sharp 40% decline from FY 2018 levels, signaling a collapse in depositor trust. A ₹10,000 crore bailout led by the State Bank of India (SBI) in 2020 under RBI’s restructuring plan temporarily stabilized the bank.

c) Stock Price Trends and Market Performance:

Yes Bank’s stock peaked at ₹370 in 2018, reflecting strong investor confidence. However, growing concerns over governance and asset quality caused a steady decline through 2019, with the stock hitting ₹42 by December. During the March 2020 moratorium, Yes Bank’s stock fell to an all-time low of ₹5.55 due to panic selling and complete erosion of investor confidence. After the bailout, the stock rebounded to ₹12–₹15 but remained far below pre-crisis levels.

d) Asset Quality Trends:

The GNPA Ratio deteriorated drastically from 7.39% in FY 2019 to 16.8% by Q3 FY 2020, reflecting the bank’s unsustainable loan book.

 

Impact on the Stakeholders

The 2020 crisis at Yes Bank had significant repercussions for various stakeholders.

1.Depositors-

• Withdrawal Limits: The RBI imposed a withdrawal limit of ₹50,000 (approximately USD 663) per depositor during the moratorium.
• Deposit Decline: Yes Bank’s deposits fell from ₹2.1 trillion in September 2019 to ₹1.0 trillion by May 2020, reflecting a decline of approximately 54%.
  

  Deposit Trends (2019-20)

2.Shareholders – 

• Equity Dilution: The restructuring plan led to a significant dilution of existing shareholders’ equity. Shares fell to an all-time low of ₹5 before closing at ₹16 after the RBI’s intervention.
• Market Recovery: Investors saw a return of approximately 70% based on market prices within three years post-crisis.
  

  Stock Price Trends (2019-22)

3. Employees –

• Job security concerns: employees faced uncertainty regarding job security due to potential layoffs and restructuring efforts.
• Impact on Morale: The crisis likely affected employee morale and productivity as staff dealt with the fallout from the bank’s financial distress.

4. Creditors and Bondholders –

• Losses for AT1 Bondholders: Additional Tier 1 (AT1) bondholders faced significant losses as bonds worth ₹84 billion were written down during the restructuring process.
• Increased Risk Perception: The crisis heightened awareness of credit risk among investors in Indian banks.

5. Corporates –

• Operational Disruption: Corporates reliant on Yes Bank for credit facilities faced operational challenges due to the withdrawal limits.
• Impact on Digital Payment Companies: Firms like PhonePe and BharatPe experienced disruptions in payment settlements

6. Public Sector Banks –

• Customer Shift: The crisis prompted a shift in customer deposits from private banks like Yes Bank to public sector banks, with public bank deposits increasing significantly.

7. Regulators –

• Regulatory Scrutiny: The RBI faced criticism for its delayed response in addressing Yes Bank’s deteriorating financial health.
• Policy Changes: In response to the crisis, regulatory bodies have focused on enhancing governance standards within banks.

 

Comparative Analysis

Where these banks (IL&FS, PMC Bank, Yes Bank) went wrong:

1. Governance Failures:

• IL&FS: Poor governance led to risky expansions and unsustainable debt accumulation. The management, particularly the board of directors, failed to implement appropriate oversight mechanisms.
• PMC Bank: Management colluded with external parties (HDIL) to conceal non-performing loans, masking the true financial health of the bank. The lack of due diligence and transparency was a key factor.
• Yes Bank: Yes Bank’s governance failed due to aggressive lending practices without appropriate risk management. The bank extended high-risk loans, particularly to the real estate sector, with little regard for the borrowers’ ability to repay.

2. Risk Exposure:

• IL&FS: The company was heavily over-leveraged in infrastructure projects, especially in power and road sectors, relying on short-term borrowing to finance long-term projects.
• PMC Bank: The bank had a high concentration of loans (over ₹6,500 crore) to a single borrower, HDIL, which defaulted, leading to massive losses.
• Yes Bank: Yes Bank’s exposure to risky corporate lending, particularly to the real estate and infrastructure sectors, was its undoing. The bank failed to assess the sustainability of these loans

3. Regulatory Failures:

• IL&FS: Despite early signs of trouble, regulators did not act swiftly enough. It wasn’t until the company defaulted on its debt obligations that the RBI and the government intervened.
• PMC Bank: The RBI had conducted audits, but the true scale of the problem was not uncovered until the bank’s position became unsustainable. By the time the RBI intervened, it was too late.
• Yes Bank: Regulatory action was delayed. Despite warning signs and increasing bad loans, Yes Bank continued to grow aggressively until it was on the brink of collapse.

4. Lack of Transparency:

• IL&FS: The company hid the true extent of its debt and non performing assets, which led to a sudden loss of confidence once the truth was revealed.
• PMC Bank: PMC Bank concealed its massive exposure to HDI  and falsified financial records to present a healthier financial picture.
• Yes Bank: The bank also hid the extent of its bad loans,
  particularly in the real estate sector, and overstated its financial
  health.

What These Banks Did and What Yes Bank Did Separately

• IL&FS:-The company had to be taken over by the government, which replaced its board and appointed a new team for restructuring. The new management worked on restructuring the company, selling assets, and trying to recover funds.

The government provided liquidity to stabilize the situation, and a
phased resolution plan was put into place.

• PMC Bank:- The RBI imposed a moratorium on the bank, limiting withdrawals to ₹1,000 per account holder, which caused panic among depositors. Furthermore, they also removed the bank’s management, and law enforcement agencies investigated the matter. Some of the bank’s assets were sold to recover funds. PMC Bank’s issues are still being resolved, and efforts are ongoing to recover
  funds.
• Yes Bank:-Yes Bank faced a liquidity crisis and was on the verge of collapse. The RBI intervened in 2020, superseding the bank’s board and replacing it with an administrator. The government, in
  collaboration with the RBI, worked on a rescue plan involving a capital infusion of ₹10,000 crore by a consortium of investors (led by State Bank of India). Yes Bank’s recovery plan focused on raising capital, selling non-core assets, and restructuring its loan book.

 

How These Measures Helped IL&FS, PMC Bank, and Yes Bank:

• IL&FS:- The government intervention with the new board helped bring some stability and restore confidence in the system. Asset Sale and debt restructuring were key to managing the company’s liabilities. While the long-term effects are still unfolding, the intervention minimized further damage to the financial system and helped mitigate the risk of a larger systemic collapse.
• PMC Bank:- The RBI moratorium gave the bank some time to assess its financial position and prevent further panic. However, this also led to chaos for depositors who were limited to ₹1,000 withdrawals. Management Overhaul and the investigation into the fraud helped uncover the truth and start a process of restitution, although the resolution is still ongoing.
• Yes Bank:- The capital infusion by the State Bank of India (SBI) and other investors helped shore up Yes Bank’s finances, allowing it to stabilize. The replacement of the board and new management ensured that there was a fresh approach to governance and risk management. The capital infusion allowed Yes Bank to resume operations and regain some confidence. Asset sales and loan restructuring were part of the longer-term recovery plan, allowing the bank to focus on sustainable growth.

 

Yes Bank Today

Financial Stability & Strategic Pivot:

By 2025, Yes Bank has solidified its comeback:

• Balance Sheet Revival: Reduced gross NPA ratio to <2% (from 16.8% in 2020) through aggressive recovery and conservative lending.
• Digital-First Approach: Leveraged AI-driven risk assessment and
  blockchain solutions to enhance transparency and operational
  efficiency.
• Profitability: Reported three consecutive years of net profits by
  2024, with a 12% YoY growth in Q1 2025.

Dominance in Nodal Account Management:

• Market Share: Processes 30%+ of India’s nodal transactions.
• Sector Partnerships: Anchored partnerships with giants like Flipkart, Zomato, and NPCI to streamline real-time settlements, reducing transaction delays.
• Regulatory Edge: Compliant with RBI’s stringent nodal account guidelines, positioning itself as a “safe harbor” for fintechs and startups.

Future Outlook:

Yes Bank now aims to expand its nodal account footprint into cross border transactions and decentralized finance (DeFi), capitalizing on India’s booming digital economy. With a renewed focus on innovation and trust, the bank has transitioned from a cautionary tale to a case study in resilient turnaround strategies.

Conclusions

 

The Yes Bank crisis serves as a significant case study in financial governance, risk management, and regulatory oversight. While the crisis had severe short-term consequences, it also triggered long-term reforms that strengthened both the bank and the broader financial system. The key lessons and outcomes from the crisis can be summarized as follows:

1. Governance and Risk Management Failures as Root Causes

• The crisis highlighted the dangers of weak corporate governance, where decision-making lacked transparency and accountability.
• Poor risk assessment frameworks led to excessive exposure to bad loans, especially in high-risk sectors.
• Internal monitoring mechanisms failed to detect early warning signs, allowing financial irregularities to persist.

2. Impact on Yes Bank

• Severe financial losses: The bank suffered a drastic decline in profitability, erosion of shareholder value, and an outflow of customer deposits.
• Reputational damage: The crisis significantly impacted customer  and investor confidence, leading to a loss of trust in the institution.
• Operational restructuring: In response, the bank undertook governance reforms, leadership changes, and risk management enhancements to restore stability.

3. Broader Economic and Banking Sector Consequences

• Public confidence in banks declined, leading to concerns about the safety of deposits and overall financial stability
• Businesses faced credit constraints, as banks became more cautious in lending to avoid similar risks.
• The financial sector as a whole was impacted, with regulators stepping in to prevent systemic risks from spreading to other banks.

4. Regulatory Reforms and Strengthened Oversight

• The crisis prompted tighter regulations, including higher capital adequacy standards, stricter lending guidelines, and improved stress-testing protocols.
• Enhanced compliance mechanisms were introduced across the sector to prevent reckless lending and improve transparency.
• Technology-driven monitoring gained prominence, with banks investing in AI and automation for fraud detection and real-time risk assessment.

5. Long-Term Outcomes: A Stronger Financial System

• The Yes Bank crisis, despite its short-term disruptions, became a catalyst for positive change in the Indian banking sector.
• It reinforced the importance of financial discipline, pushing banks to adopt better governance structures and more responsible lending practices.
• The crisis accelerated technological advancements in banking, fostering greater transparency and efficiency.
• The banking sector emerged more robust and resilient, better
  prepared to handle financial shocks in the future

References

1. Yale School of Management. “Yes Bank Crisis.” Journal of Financial Crises, vol. 2, no. 1, 2021, pp. 1-20, Yale University.
2. Moneycontrol News. “As Yes Bank Crisis Team Heads for Exit, a Re-look at India’s Biggest Bank Bailout.” Moneycontrol, 10 Aug. 2022.
3. Business Standard. “Yes Bank Stock Crash and Financial Mess: How the Crisis Unfolded in 2 Years.” Business Standard, 6 Mar. 2020.
4.  iPleaders. “Analysis: Yes Bank Crisis.” iPleaders Blog, 15 Sept. 2021.
5. ResearchGate. “The Yes Bank Crisis.” ResearchGate, 2021.
6. IOSR Journal of Business and Management (IOSR-JBM) – A Study on Yes Bank Crisis.