All ado for nothing – YES BANK Divergence Debacle

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Yesterday, YES BANK announced its ‘Divergence In Asset Classification And Provisioning For Position As On March 31, 2018’.  The report states and I quote: ‘YES BANK has received the RBI’s Risk Assessment Report for FY2018, which observes NIL divergences in the Bank’s asset classification and provisioning from RBI norms. This announcement has been followed by a meteoric rise in the YES BANK stock prices, which shot up to over 30% from their previous day value.

If you have been following the whole chatter around YES BANK, you would know that the RBI abruptly ended its CEO Rana Kapoor’s tenure, and divergences was perceived as one of the key issues for the same. The Reserve Bank of India on a periodic bases assesses compliance by Banks with extant prudential norms on income recognition, asset classification and provisioning (IRACP) as part of its supervisory processes. YES Bank had reported divergences of Rs. 4,176 Cr. for FY2015-16 and Rs. 6,355 Cr. in FY2016-17. So NIL divergence in FY 2018-19 suggest strong fundamentals for India’s 4th largest private sector bank. And it also begs answers and explanation from the RBI for its decision on terminating the CEO’s tenure sans a succession plan; but also for eroding crores of investor wealth. 

Rana Kapoor delivers a masterstroke in his final tenure as MD & CEO by delivering a clean chit to investors. It’s time to reaffirm your faith in YES BANK, and hold on to the stock; because the only way it will go is up!


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