A Case of Yes Bank

YES Bank was the 5th largest private lender by market capitalization. The reason behind its downfall was its exposure to bad loans With lenders defaulting on these loans, NPA reached record levels. While these bad loans are lining up on one side, YES bank neither had enough provisions for the bad times. It was the lowest among other banks (YES bank provision ratio-43.1% other Banks > 70%) this led to a situation where it wasn’t able to raise enough capital to make up for the potential nonperforming assets.

The situation got so worse when the customer confidence dropped so low, and people were lining up in front of Banks to get their money out. This led to a massive drop in depositors amount and the credit to deposit ratio(CD ratio), which was more than 100%. That is, they were lending more than they had. This froze the liquidity, which reduced confidence further, and more withdrawals and cycle runs for itself. In summary, it was the exposure to the risky borrowers, which led to the entire downfall of such a mammoth bank.

Corona & Jobs

With corona crossing borders everyday and taking countries under its effect, it has led to the closure of big economies. The lockdown which is necessary to contain it has resulted in a slowdown to a complete halt of economic activities. But what will happen as the global epidemic recedes and the economic wheel starts spinning again? The impact on each sector will be different, but every industry will be impacted. With tourism and hospitality are one of the worst sufferers currently, further losses are expected until the countries lift the restrictions. The manufacturing sector is also expected to cut jobs, every passing day of shutdown leads to piling losses, with labor as the principal constituent of operational cost. To minimize it, companies will go for job cuts, especially in the lower wage sector.

Aviation companies all across the globe are demanding relief packages, with many airlines operating flights with revenues unable to cover the operating cost. In the same contractual labors are at the highest risk of losing jobs here as well. The pharmaceutical industry which heavily relies on the other countries for its raw materials supply is affected by disruptions in the global supply chain. However, health and telecom sectors are not expected to be affected. With the employees working from home in most industries, the demand for data is surging up

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