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Commercial Banking

Yes Bank 2020 rescue

In March 2020 the Indian government placed Yes Bank, then a sizeable private-sector lender, under a 30-day moratorium capping withdrawals at Rs 50,000 after it failed to raise capital against loan losses and lost deposits. A State Bank of India led reconstruction restored operations within two weeks, and the bank survived.

Failed strategy Surviving with failed strategy Moderate
Company
Yes Bank Limited
Started
Unknown
Ended
2020-03
Deposits fell from Rs 2.1 trillion (September 2019) to Rs 1.1 trillion (31 March 2020)
About 52 percent decline by May 2020 (Yale summary)
Collapse speed
Rapid
Preventability
High
Lesson transfer
Industry-wide
Last reviewed
2026-09-21

Narrative

The story

The ambition

Yes Bank was an Indian private-sector bank that lent heavily to corporate borrowers in the years before 2020.

The rise

The sources read for this entry describe the bank as exposed to stressed sectors and borrowers but give no verified figures on how fast its loan book grew, so none are stated here.

The cracks

The Yale Program on Financial Stability summary names the default of IL&FS in September 2018 as a major catalyst and describes deposit withdrawals, extraordinary credit provisions and overexposure to stressed sectors. By December 2019 the bank reported a quarterly loss of about Rs 185 billion and a capital adequacy ratio of 0.62 percent against a requirement of 7.4 percent, according to that summary. Deposits fell from Rs 2.1 trillion in September 2019 to Rs 1.7 trillion in December and Rs 1.1 trillion by 31 March 2020.

The collapse

On 5 March 2020 the central government, on the RBI's recommendation, imposed a moratorium from 6 pm that day to 3 April, superseded the board, appointed a former State Bank of India CFO as administrator, and capped withdrawals at Rs 50,000 per depositor, with exceptions for medical, education and similar needs. The RBI cited a rapidly deteriorating position on liquidity and capital and the absence of any credible plan to infuse capital. The notification also referred to serious governance issues and practices in recent years, and to the bank's inability to raise capital to cover loan losses.

The aftermath

On 6 March the RBI published a draft reconstruction scheme under which State Bank of India would take 49 percent and hold at least 26 percent for three years. The scheme came into force on 13 March. The Yale summary records a capital injection of about Rs 100 billion from eight banks led by SBI at 48.2 percent, a permanent write-down of about Rs 84 billion of Additional Tier 1 bonds, and a Rs 600 billion RBI liquidity facility. The moratorium ended early on 18 March. Depositors suffered no loss, and by 2023 deposits had recovered to about Rs 2.2 trillion.

The lessons

A bank can pass for years on reported numbers and fail in weeks once funding stops. Here the sequence ran from a large borrower default to a failed capital raise, a deposit run and a rescue arranged over a single weekend. The design of the rescue is the more portable lesson. Public-sector and peer banks were brought in at once, depositors were fully protected, and the losses fell on holders of subordinated bonds and equity.

Causal timeline

Failure Anatomy

  1. 2018-09

    A large borrower defaults

    In September 2018 IL&FS defaulted, described in the Yale summary as a catalyst for the bank's troubles. [3]

    External shock
  2. 2019-12

    Deposits leave and losses mount

    Deposits fell from Rs 2.1 trillion in September 2019 to Rs 1.7 trillion in December, while the bank reported a Rs 185 billion quarterly loss. [3] [4]

    Debt burdenUnsustainable economics
  3. 2020-03-05

    The moratorium

    On 5 March 2020 the board was superseded, an administrator appointed and withdrawals capped at Rs 50,000. [1] [2]

    Regulatory pressure
  4. 2020-03-13

    A State Bank of India led reconstruction

    The RBI's draft scheme of 6 March had SBI taking 49 percent, and the scheme took effect on 13 March. [5]

  5. 2020-03-18

    The moratorium is lifted

    The moratorium ended early, on 18 March 2020. Depositors suffered no losses and deposits recovered to about Rs 2.2 trillion by 2023, while about Rs 84 billion of AT1 bonds were written down. [6]

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Structured analysis

What Went Wrong

Root causes

Loan losses the bank could not cover with new capital. The Government notification and the Yale summary describe loan losses, overexposure to stressed sectors and an inability to raise capital as the source of the decline. [2] [3]

Contributing factors

A major borrower's default in 2018. The Yale summary names the September 2018 IL&FS default as a catalyst. [3]

Governance issues cited by the authorities. The notification, as reproduced by Taxguru, referred to serious governance issues and practices in recent years. This is the authorities' characterisation, not an independent finding of this archive. [2]

Immediate trigger

Moratorium imposed on 5 March 2020. The government suspended the board and capped withdrawals at Rs 50,000 after capital raising failed and deposits fell. [1]

Visible symptoms

Deposit outflows and a near-zero capital ratio. Deposits fell about 52 percent from September 2019 to May 2020, and the capital adequacy ratio was reported at 0.62 percent in December 2019. [3] [4]

Warning signs

A quarterly loss and collapsing capital ratio by December 2019. The reported quarterly loss of about Rs 185 billion and 0.62 percent capital ratio preceded the moratorium by about two months. [3]

Affected groups

CustomersInvestorsTaxpayersEmployees

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Evidence

Claims & sources

Every numbered marker in the analysis links to the claim it rests on, and each claim to its sources.

  1. [1]

    On 5 March 2020 the central government imposed a moratorium on Yes Bank until 3 April 2020, superseded its board, appointed an administrator, and capped withdrawals at Rs 50,000 per depositor with exceptions for emergencies.

    High Fact Yes Bank Ltd. draft reconstruction scheme RBI Imposes Moratorium On Yes Bank, All You Need to Know Yes Bank placed under moratorium, depositor withdrawal capped to Rs. 50K
  2. [2]

    The RBI cited a rapidly deteriorating position on liquidity, capital and other parameters and the absence of a credible capital plan. The notification also referred to an inability to raise capital against loan losses and to serious governance issues and practices in recent years.

    Moderate Reported explanation Yes Bank Ltd. draft reconstruction scheme Yes Bank placed under moratorium, depositor withdrawal capped to Rs. 50K RBI Imposes Moratorium On Yes Bank, All You Need to Know
  3. [3]

    According to the Yale summary, IL&FS's September 2018 default was a catalyst, and by December 2019 the bank reported a quarterly loss of about Rs 185 billion and a capital adequacy ratio of 0.62 percent against a 7.4 percent requirement.

    Moderate Reported explanation Yes Bank moratorium (Bank Holidays and Fund Suspensions)
  4. [4]

    Deposits fell from Rs 2.1 trillion in September 2019 to Rs 1.7 trillion in December 2019, Rs 1.1 trillion at 31 March 2020, and about Rs 1.0 trillion on 2 May 2020.

    Moderate Fact Yes Bank moratorium (Bank Holidays and Fund Suspensions)
  5. [5]

    The RBI's draft scheme of 6 March 2020 provided for State Bank of India to take 49 percent at a minimum Rs 10 per share and hold at least 26 percent for three years. The reconstruction scheme took effect on 13 March 2020.

    High Fact Yes Bank Ltd. draft reconstruction scheme Yes Bank
  6. [6]

    The moratorium ended early on 18 March 2020. Per the Yale summary, about Rs 100 billion was injected by eight banks led by SBI at 48.2 percent, about Rs 84 billion of AT1 bonds was permanently written down, depositors suffered no losses, and deposits reached about Rs 2.2 trillion by 2023.

    Moderate Fact Yes Bank moratorium (Bank Holidays and Fund Suspensions)

Sources