After going through a difficult time in its history, Yes Bank, one of the top private banks in India, has been making progress towards recovery. The Reserve Bank of India (RBI) placed limitations on the bank in March 2020 due to concerns about its financial stability and governance. The RBI’s recent decision to eliminate the limitations, however, has had a favourable effect on the shares of Yes Bank. We shall examine recent news and its effects on the Indian stock market in this post.
What took place?
The RBI imposed a moratorium on Yes Bank on March 5, 2020, which restricted client withdrawals and suspended the bank’s board of directors. The RBI has given three reasons for the restrictions: poor governance, bad loans, and a lack of capital. The bank’s stock had fallen by more than 80% as a result of this move, which had sparked fear among investors and depositors.
During that time, Yes Bank has been making progress towards recovery. By a follow-on public offering, the bank was able to obtain capital, and as a result, its financial situation has improved. Prashant Kumar, who is credited with turning around the bank’s woes, was also appointed managing director and managing director by the RBI.
The RBI declared on March 31, 2021 that the limitations on Yes Bank had been lifted, citing the bank’s improved financial situation and governance changes. The bank, according to the RBI, had made substantial strides towards resolving its prior problems and was now well-capitalized and ready for expansion. The bank’s investors and shareholders, who have been waiting for a positive development for a while, have applauded this decision.
Effect on Shares of Yes Bank
The price of Yes Bank’s shares has significantly changed as a result of the relaxation of the lending restrictions. The bank’s shares increased by almost 30% the day after the news and finished at Rs. 16.80. Since July 2019, this was Yes Bank’s stock’s highest closing price. The rise persisted over the next few days, and on April 1, 2021, the bank’s shares reached a high of Rs. 18.70.
Experts have credited the surge to investors’ upbeat attitude following the RBI’s decision. With the limits lifted, a significant source of uncertainty for the bank has been eliminated, and investors are now upbeat about its chances moving forward. The favorable attitude has also been influenced by the bank’s improving financial health and governance reforms.
Indian Stock Market Effect
The Indian stock market has benefited from the relaxation of lending restrictions on Yes Bank. One of the biggest private sector banks in India is Yes Bank, whose problems have sparked worries about the state of the country’s financial system. It is clear from the RBI’s decision to eliminate the limits that the regulator is optimistic about the future of the industry.
The banking sector index has increased by more than 4% since the announcement, and the bullish feeling has spread to other financial stocks. On April 1, 2021, the Nifty 50 index, which measures the performance of the top 50 Indian corporations listed on the National Stock Exchange, reached an all-time high of 14,867.35.
The removal of the lending limitations on Yes Bank is more evidence of the bank’s resiliency and capacity to overcome adversity. The bank has proven that it is capable of implementing the essential changes and advancements to resolve its previous problems and move forward.
The RBI’s decision to ease the lending limits on Yes Bank is, in summary, a positive step for the Indian banking industry and the stock market. Investor confidence has increased as a result of the decision, which also shows how confident the regulator is in the sector’s future. Therefore, before purchasing banking stocks, investors should exercise caution and due diligence. About Yes Bank, the removal of the restrictions is evidence of its tenacity and capacity to implement the required changes to advance.