The Facts (As on 10. AM. March 6th, 2020)
- There is a Moratorium on Yes Bank from March 5th till April 3rd; The ministry of finance Moratorium on Yes bank is for the period 5th March 2020 – 3rd april 20. The moratorium restricts payment to a depositor of the bank a sum exceeding Rs. 50,000/-.
- RBI has superseded the Board of Directors of Yes Bank and its RBI not Yes Bank Board of directors will be in charge at least for next 1 month
- BSE removed Yes Bank from F & O
- SBI Board discussed Investing in Yes Bank in its Board Meeting
What’s not clear yet ?
- Are there any restrictions on the Current / Savings account activity of Yes Bank Customers?
- Is SBI &/or LIC or their Consortium Investing in Yes Bank?
So, in School we were taught this English phrase:
“There is no smoke without fire”
meaning that if you see Smoke coming out from somewhere then there is definitely fire somewhere.
Now it’s been more than 2 years that some of the other news is coming out about YES BANK and mind you none was positive news; If A boy/girl gets repeatedly rejected by suitors then there might be some problem there.
Over the last few months, more than 15 suitors rejected buying Yes Bank for one reason or the other: Its Promoter RANA KAPOOR exited Yes Bank completely long time back and this happened a few months after his famous words “DIAMONDS ARE FOREVER” when asked whether he will exit Yes Bank…
Yes bank Red flags
1. More than 2 dozen negative articles come on Yes Bank over a period of 2 years,
2. Promoter exits completely,
3. Insiders & Senior Management sell Yes Bank Shares;
Now, these are enough #Red flags for a Yes Bank Investor (if we can call him/her one) & Depositor to move out following the principle “CAVEAT EMPTOR” or “BUYERS BEWARE”…
ETFs are dumb
Of late there is a lot of interest in ETFs and INDEX Funds from HNIs without understanding how they actually work; ETFs & especially Index Funds are passive dumb funds that invest & copy the underlying index withoup applying mind; so if a Banking Index has some allocation to Yes Bank I shall buy it in my Index Fund or ETFs even if it is clear that Yes Bank is going down the drain
Therefore, other things being equal its always better to invest in a Equity Diversified MF managed by an Active Fund Manager rather than investing in a stupid / dumb Fund.
Do not Paint everything with the same brush
The biggest learning after Yes Bank episode is that Not all Bank FDs are same & safe;
Similarly, not all Debt Mutual Funds are equally safe; Take Professional Advice before investing money in LIQUID & DEBT Mutual Funds; do not self-medicate yourself
Debt Mutual Funds having more than 5% Exposure to Yes Bank
Avoid these Funds at any Cost
|Debt Fund Name||Exposure (%)|
|Baroda Treasury Advantage||26.87|
|Nippon India Strategic Debt Fund||21.25|
|IDBI Credit Risk Fund||12.09|
|Nippon India Credit Risk Fund||10.96|
|Nippon India Equity Hybrid Fund||8.11|
|Nippon India Hybrid Bond Fund||8.06|
|Nippon India Equity Savings Fund||7.27|
|UTI Credit Risk Fund||6.38|
|PGIM India Credit Risk Fund||6.20|
Q. Was GOI/RBI decision to ask SBI /LIC to intervene in Yes Bank matter correct?
Ans. Yes Bank is India’s 5th Largest Bank Handling approx. 1.5% of Banking Systems deposits. So, it’s too big to fail although RBI had not classified it so… If Yes Bank collapses, then it will have a Dominoes effect on entire banking system…
YES it was the perfect decision & if not done Yes Bank would probably had collapsed; Only caveat is that this step should have been taken a few months back; that way situation would have been much better…
Q. Is my Yes Bank Demat Account Safe?
Ans. YES Your Yes Securities Demat Account is Safe; But when you will sell Shares the money gets credited to your Yes Bank account then you cannot Withdraw those Funds; from that angle you are in trouble
Q. My Mutual Funds have Yes Bank as primary bank account linked , What should do?
Ans. Most Mutual Funds have proactively blocked Redemptions to Yes Bank if that’s your primary bank account. And this is actually in your interest because if money gets deposited in your Yes Bank then you cannot Withdraw it…
Our Suggestion: Get your primary bank in Mutual Funds changed to some other bank before proceeding with the Redemption.
Q) Is my Yes bank FD Safe?
Ans. Please Listen to what the Experts are saying:
- Rajneesh Kumar, Chairman of SBI said Depositors interest is well protected & no need to worry
- RBI Chairman Shaktikanta Das said the same
- HDFC Bank Chairman Deepak Parekh believes that GOI & RBI will not disappoint the Depositors
- Kotak Bank Chairman & MD Uday Kotak ; Equity Value of Yes Bank depends upon the restructuring terms but the Depositors interest are well protected by RBI
- Nirmala Sitharaman, Finance Minister: I want to assure every Depositor that there money is safe
Q) Should I buy Yes Bank Shares?
Ans. Fools rush in where angels fear to tread
The Irony is while the whole world was selling there Yes Bank shares the smart alecs (can we call them Smart?) went on buying spree as if India had only 1 listed Banking Stock…
(See Graphic below:) Between Dec 2018 & Dec 2019 Promoters Stake in Yes bank went down from 19.82% to 8.33%; Institutional Shareholding went down from 57.70% to 29.38% BUT , hold your breath, the Retail Shareholding went UP from 22.48% to 62.30% ; So Promoters who know everything reduce their stake; Institutional Shareholders who do a thorough research & are extremely well informed reduced their stake by half but Retail Investors tripled their stake in Yes Bank; less said the better..
Today there are 2 Institutional Research Reports on Yes Bank saying that actual Price of Yes Bank is Re. 1.00: Yes you read it right…
Learnings from Yes Bank episode & Precautions going ahead:
- Biggest Myth in India is that Bank Fixed Deposits in all kinds of bank are Equally Safe
(PMC Bank/ local Cooperative Banks / Global Trust Bank / Sangli Bank & now Yes Bank)
- Other things being equal, Lend your Money to that party who gives you least Interest rate; Choose a Debt Mutual Fund & a Liquid Mutual Fund that promises Least Returns (Please read this line carefully & read again)
- We are living in troubled times; Follow the adage below:
RETURN OF CAPITAL is more important then RETURN ON CAPITAL
INVEST Wisely; Use Professional Help before Investing…