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The Government of India placed Yes Bank under moratorium and capped withdrawals for a month, while the RBI superseded the Board of the private lender citing a steady decline in its financial position. The Ministry of Finance took the decision after considering an application submitted by the Reserve Bank of India, said a ministry statement on Thursday (5th March 2020) evening. The moratorium will last till April 3, 2020, and all legal proceedings against the bank will stay during the period, it said. The bank is not allowed to pay any depositor more than Rs 50,000 without written permission from the RBI during the period of moratorium.

Our Precautionary Action

We were continuously monitoring this problem since May-2019  last year when rating agencies downgraded the bank’s ratings twice in a row.

We had thoroughly analyzed the fundamentals of this bank and had found that the bank had a shortage of sufficient working capital and it’s ICR (Interest Coverage Ratio) was much lower than the standard which was not sufficient for the bank to fulfill it’s interest obligation. Further, the bank’s biggest borrowers were constantly defaulting, which had put the bank into a difficult situation., Considering all this, we had listed out the debt funds with Yes Bank exposure and had shared notes with our partners and customers with a suggestion to exit.

We had specifically advised exit from the following funds: 

  • Nippon India Equity Hybrid Fund
  • Nippon India Credit Risk Fund
  • Nippon India Equity Savings Fund
  • Nippon India Ultra short term debt

Debt Funds holding Yes Bank in their portfolio were not part of our recommended list since June 2019 and have resulted in a minuscule (about 0.25%) of our total corpus exposed to Yes Bank debt papers. The Yes Bank fiasco reinforces the need for a mutual fund distributor while making an investment decision. Apart from the initial investment, it is constant tracking which is critical in the highly dynamic environment that we live in these days.