IL&FS, Dewan Housing, Jet Airways, Cox & Kings, CG Power, Cafe Coffee Day, Altico-name a bad boy of Indian financial services sector and you are likely to find YES Bank as a key lender.

A bank that started from scratch and built an asset book of over Rs 3 lakh crore in a little over a decade was signing away cheques to nearly every borrower who either went bust or turned a non-performing asset within years.

But it was not without adjusting for risk as it charged high interest rates for taking the exposure in troubled times.

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The stock market also rewards high growth companies. The high growth in the bank’s loan book, deposits, profits and balance sheet pushed its stock price to stratosphere. The stock had once crossed Rs 1,400.

However, as non-performing assets began to unwind, its stock is currently at around Rs 36 per share.

The driving force behind the bank was its founder and the MD Rana Kapoor. A foreign banker, Kapoor was well networked in the corporate sector. In fact, he used to cut most of the deals. Kapoor found his niche to lend to well known companies that were finding it difficult to get finances from existing lenders. What looked like a master stroke turned out to be the bank’s nemesis.

But as they say, a loan doesn’t become bad overnight. It takes 3-4 years for the stress to show up, YES Bank’s trouble also started when the economic cycle turned worse and there were surprises one after another in the last two years.

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Many bankers had earlier told Business Today the bank was doing loan deals with the promoters directly without going the consortium way. In fact, it often supported companies that were finding it difficult to get any money from existing lenders. This route not only gave him higher interest rate, but also secured a collateral against that loan. But when things turned bad, the bank found it difficult to monetise the collateral either. Take for instance, the shares it had as collateral in some cases where the value deteriorated because of the slide in the fortune of the corporate entity.

Most of the loans were given in the post 2008 period when the economic scenario was deteriorating fast. The Indian economy soon saw GDP crashing with over leveraged corporates. Currently, the bank was sitting on a Rs 31,000 crore book of BB rated and below, which is not of the best quality of companies. In fact, the bank itself admitted that there was a chance of Rs 25,000 crore of that book going bad. And that may be the most conservative estimate.

In fact, the new CEO Ravneet Gill made a good start by being transparent on asset quality issues. In an analyst meet, Gill came out with a figure of Rs 29,000 crore for sub-investment grade or BB and below investments loans. He assured the analyst community that out of the below investment grade book, Rs 10,000 crore was on the watch list for possible future NPAs. But in June quarter of 2018-19, fresh slippages came from outside the watch list.

In the last few months, the bank was making all out effort to reduce its exposure to stressed sectors like NBFCs, housing finance companies and real-estate. In fact, the bank’s belated move to scale up retail assets also didn’t yield any results.

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