If you have your money in YES bank, RELAX. Your money is stuck there for some time. Yes the RBI is saying 30 days, but it will take perhaps 60 days. Nothing is lost. Does not matter if you have 30L or Rs. 10 crores – however if that is your working capital, it is going to cause you a lot of pain for the next say 60 days.

What happens? well as usual the highest risk taker – the equity holder gets diluted dramatically. Could range from 60% dilution to 90% dilution. Putting it simply from about 250cr. shares it will go to 2650cr shares – this is being brought in by SBI. So the share will not go to zero (though it should!). I guess it will hover around 30, which seems to be the new bottom.

How equity does not go to zero, but Tier 1 goes to zero beats me, and I expect the Tier 1 bond holders to go to court. I would, if I were a Tier 1 bond holder. From what I have heard (not verified) Max Financial services has about Rs. 2000 crores in Tier1 bonds – and took a hit from Rs. 580 to Rs. 480 yesterday.

To live in India and lend to banks is the best thing to do. I would not blame any fund manager who lent to YESBANK – it was not seen as a basket case. Remember it is still in the Nifty. However, there are big prominent fund managers who had a lot of Yesbank equity, and they would be facing a lot of questions from the investors. Remember debt funds with exposure to YesBank will not look so bad after 60 days. If I were them, I would stop accruing the interest – not sure if a hair cut is coming there.

SBI will hold 26% of the equity, and not more than 49% – obviously it will be a non PSU bank. If more money is needed, I guess it will have to be some line of credit – anyway raising money now will become easy with the umbrella of SBI. The worry is how much of the accounts will be cleaned up. One thing which YesBank would do was to take the interest up front and show it as “fees”. All those shenanigans will stop. Will people leave? well at the top very likely. Most private sector bankers stick around for the ESOP. With SBI coming in, the compensation structure may change (will change) – and the man earning Rs. 10L will not sign on compensation of Rs. 3 crores very easily. Time will tell. I expect some people to stick around – remember not all of YesBank top executives are employable in other private sector banks – Axis and Indusind in particular. Hdfc bank may fish at the lower end -but that is another story.

This is a full and complete rescue of YesBank – do not worry about the Rs. 5L limit. Now with the new owner SBI it becomes as safe as Hdfc bank, so no sweat. However, the caveat always – do not put too much money in one bank. The dilution by SBI could be lesser if they decide to raise money in a QIP at say Rs. 100 (do not underestimate the markets ability to over pay) say in 2022. This will mean lesser dilution. I do not think that a buy back of shares will happen (TARP, remember).

I do think this was quick – but I expect the Tier 1 holders to go to court. Their money too should have been converted – say at Rs.30 – which is a form of a hair cut.

What should you do if you have bought the shares at Rs. 300, 200, 100….or at 35? Well hold. The situation is not worse than what it was about 2 weeks ago. We are now acknowledging publicly what some of us knew privately, that is all.

What should you do if you have your cash, home loan, credit card…in YesBank?well nothing, for say 60 days. Just sit tight, and then, as usual reduce your exposure. Now you have less to worry – a bank owned by SBI will not fail. Will not be allowed to fail.

I wish I could publicly tell you the Rana saga – goes long back. When you are old like Bheeshma Pithamaha, your remember Shikhandi was Amba in the previous birth. It helps. Helped me keep away from this swashbuckling hero, a master cook.

If I were to run a bank, I would take the help of the EX ED of Hdfc bank. I hope he comes back – as the new MD. That will help me buy more Hdfc bank. Right now I am sitting on cash got by selling Hdfc bank, waiting to buy it back.

What implication of this for Indusind bank, Equitas, Bandhan, etc? Well. they will find it difficult to raise Tier1 bonds. It will make fund raising in general tough for some of these banks.

However if these banks, and the big Nbfc like Cholamandalam get their act together, there will be a lot of assets of small banks available at a decent yield.

wow……banking is fun!! When your chips are down fund mangers who brought ruin to many investors can take a pot shot at the best fund manager with a 25 year track record. Know both of them personally, so can’t (won’t) name them.

This is a beautiful market. Some guy taking risk with Yesbank today could look smart / brilliant in 2025 or like a complete Idiot. In 2025 the Fund Manager who is not in public domain will write an article (and old lady of BoriBunder will publish) an article about it.

In 2045 they will say how “If you had invested Rs. 1 crore in Yesbank in 2020, it is now worth Rs. 450 crores”. And you will all applaud and feel it was so simple.

I would be dead. Like Pmc bank.