Indian bank's meltdown takes out several popular services
techcrunch.com
techcrunch.com
My father and I are small business owners in two entirely different fields. Every now and then we talk about what we've been hearing - scuttlebutt etc. Both of us, in different cities multiple states away, heard that this was going to happen at least 7 months ago.
There has been a bunch of media coverage about the bank's financial woes as well.
I'd have moved off their infrastructure a long time ago. I know in some cases it's easier said than done, but I feel like you really had to know that this was coming, especially if you're a big corporation. There's really no excuse for being caught like this when even a small time guy like me could have told you this day would come.
Edit: For clarity - while there are ways to get infusions of funds to avoid this scenario, I was sure it would be inevitable because there is a well-founded reputation of corruption, fraud and a general culture of shady practices surrounding this bank. High profile folks at the bank were charged with some of these crimes in 2018 if I remember correctly.
PhonePe, a payment app valued at $7 billion and a subsidiary of Walmart owned Flipkart has been down since this morning since Yes Bank was the only bank they had partnered with since 2016.
A $7 billion dollar company running without failover / redundancy is just crazy.
Google Pay, their competitor on the other hand has atleast 2 banks (HDFC and Axis) it has partnered with.
What's worse is Yes Bank/Phone pe handled around 40% of daily UPI transactions - so millions of folks have been affected by this screw up.
That's kind of the point, but the valuation is very misleading when it comes to expectations like this.
PhonePe, the leading UPI-provider app was running it with Yes Bank as the partner, but the bank went down.
It's very likely now that Visa and Master Card network will never penetrate in India beyond the wealthy class that travels abroad. This was kind of a pre-emptive strike to keep rent seeking companies at Bay.
This seems... odd to me. Almost like they got the money and said "thanks for that... erm, we forgot to mention this other thing here..."
On another note, what's with Techcrunch messing with the back button? It takes 4 clicks to get back out!
I was at RBS at the time and I remember the fallout later when they realised that paying £10Bn in cash for ABN was a total disaster.
I believe the term that was used was "due-diligence lite" to refer to the amount of investigation performed. Which was especially stupid given that, I believe, Barclays had already walked away from the deal.
With adblock on, my back button works just fine.
As it happens Yes Bank they have given out a lot of bad loans which did not get repaid. That is the primary reason Yes bank is not doing great. Apart from this there are allegations of corruption against the top level executives of the bank. But mainly its the concern about the bank's balance sheet that has prompted RBI to act.
They are under because of a lot of shady practices like knowingly giving out bad loans, corruption and self dealing that enriched it's founder. He had been ordered by the regulator to step down 2 years ago, but that didn't prove to be enough to save the bank.
For example the founder and ex CEO was involved in a scheme where Yes Bank disbursed bad loans to a prominent business (Indiabulls) family, in exchange for which the family's business lent huge sums to Yes Bank's CEO and his children.
Beyond this Yes Bank loaned out several billions of dollars to companies that other banks were unwilling to lend. Most of that money never came back.
The Bank of England used to let employees have mortgages with the bank. Random people couldn't get a mortgage from the Old Lady but their employees could. It's a huge National Bank, giving some middle manager a $0.5M mortgage on a nice house for his family at a slightly nicer rate than commercially available is a cheap perk and no real threat to stability of a trillion dollar GDP economy.
But while it's different in quantity and character it sends the wrong message. The newly created First Bank of Elbonia sees this and figures it's fine to lend $500M (a tenth of tiny Elbonia's GDP) to their chairman who is coincidentally also the brother-in-law of their newly elected Grand President. The money is never paid back, Elbonia sinks into a swamp of corruption. Oops.
So the Bank of England stopped offering such perks. It's a shame, but it's like when you're looking after young kids. Maybe you'd just run across this road, but with kids watching we should walk to the proper crossing and do it by the book. No self-dealing.
Lending $500M without collateral seems like a completely different thing.
Even UPI had pretty low margins, and wasn't really making them much money to make up for the HUGE losses they had because of the bad loans.
A relative, years ago, made me aware of a small deposit they’d made in my name there. After being rotated between half a dozen customer service reps, communicating over e-mail and WhatsApp and SMS, contradicting each other at every turn, I gave up trying to set up an account to manage and/or withdraw the funds.
Abysmal service culture. Not surprising to see that had knock-on effects.
There's actually a big bank in India called "Indian Bank" that is not affected here.
PhonePe is a cool app, which a lot of people, especially small time vendors accept.
I pretty much use PhonePe for everything these days.
Yes Bank launched PhonePe on Day 0 of UPI. The whole multiple bank thing was made possible much later via NPCI because of Google Pay.
I wouldn't blame them for it. And they managed to get back up in 24 hours, which is pretty decent. (The Bank itself is still down, but payments via PhonePe are functional as long as you have a non-yesbank account)
I don't see how a private insurer would inspire the same confidence. The amount of reserves would have to be huge, and verified. Somehow, the insurer would need to be able to quickly wrest control over a troubled bank. And that's assuming the bank doesn't stop paying the insurance and 'forget' to update its website.
They do publish details about premiums in the annual reports (last report is still pending, sadly)
I was still hoping turnaround considering lot of people are using "PhonePay", but you never know.
But a lot of boats have been rocked across large and small banks. Lots of small-banks are getting merged, and NPAs are at peaks.
But RBI's refusal to let Yes Bank collapse means that it can only go upwards from here.