Why no Funding to the Funder?

Article authored by
Shipra Walia, W S & Associates LLP.

With the morning sun, the news flashed that
Reserve Bank of India has taken over the affairs and placed strict limits on
the operations of Yes Bank, and since then the stock market is taking its own
plunge.

However, the question that strikes the mind is that why Yes bank, after
so many desperate efforts and being the 5th largest bank in India, is not able
to raise capital to survive? Or is it only the cash crunch that has led to the
decline?

Exit of promoter, asset quality deterioration, NPA divergences and
lower capital levels have all led to the scare of decline of a 40 Billion USD
balance sheet. Further, Moody’s has downgraded Yes Bank’s baseline credit
assessment (BCA) and adjusted BCA to ba2 from ba1. Changes in the corporate
lending strategy by the successor of promoter has also delayed the loans.

Thus,
one lesson to be learnt by the business world is that people pose their trust
in the promoter who actually gives birth and then raises the child. Many
promoters after running a business for some year take a move with a good return
on their investment; however, the time, effort and the nurturing habit that the
business gets from its promoters stays behind.