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Indian bank's meltdown takes out several popular services
- farseer 7y agoAre all deposits insured? It seems they have placed restrictions on withdrawing more than $600.
- threqwer34234 7y agoThe deposit insurance is technically only about Rs. 1.00.000 (~ $1500)
- ashkulz 7y agoIt was raised to 5x of that in February, but doesn't help as that requires the bank to be declared as failed. The regulator (RBI) has refused to do that in multiple instances, most notably in the case of PMC Bank a few months ago.
- sn41 7y agoThank you for that information. It makes much more sense now why these zombie banks are allowed to remain around.
- _Understated_ 7y ago>Oct. 31 - Yes Bank gets binding investment offer of $1.2 billion from global investor, sends stock 39% higher. >Nov. 1 - Yes Bank reports bigger-than-expected loss for the second quarter, as bad loan ratio deteriorates to 7.39% and provisions swell to 13.36 billion rupees 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!
- twodave 7y agoTypically an investor of that magnitude would have pretty free access to such financial information. A failure to disclose something like this on the bank’s part would constitute fraud, and a failure by the investor to discover this given free access would just be naive and negligent (i.e. they deserve the consequences). Maybe in India the rules are different, I’m speaking from my local experience in the US.
- _Understated_ 7y agoRegulation would likely dictate thorough investigation but I know of one example where it didn't happen: RBS purchase of ABN Amro circa 2008. 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.
- sumanthvepa 7y agoSame problem with the back button. Techcrunch seems to be deliberately attempting to disable the back button.
- fastball 7y agoPresumably it's just tracking layers in between the link and the actual article? With adblock on, my back button works just fine.
- sumanthvepa 7y agoYup you're right. On initial click it takes you through a bunch of tracking redirects. Subsequent visits don't show that behavior.
- aszantu 7y agoUsing duckduckgo browser on smartphone, back worked with one clicking
- fareesh 7y agoNormally I'd sympathize but there were signs of this being inevitable for a very long time now. 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.
- duxup 7y agoWouldn't moving money effectively make the crisis happen quickly and inevitably many, or maybe most people would simply be unable to move faster than others?
- fareesh 7y agoIn this case the bank was offering technology solutions like point-of-sale machines and QR Code payments and Payment Gateways and accounts for the Unified Payments Interface system, all of which stopped working because the bank is now unable to carry out its normal operations.
- duxup 7y agoAh thank you.
- hef19898 7y agoJust like the Hanjin, major container carrier, bankruptcy. Everybody was cought by surprise despite a lot of early warning signs.
- JumpCrisscross 7y agoOh my, Yes Bank. 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.
- frandroid 7y agoHow does one "make a deposit in your name" if you did not have an account already?
- soared 7y agoMost online fintech services allow this - you can send money via paypal to any email address, send a venmo to any phone number, etc regardless if an account exists or not. The services will let you take back the payment if no one claims it. (On ios open a new blank text, open the apps section, click venmo)
- frandroid 7y agoThat's not "making a deposit" means, but I get your point. If that's what the OP meant, then I take issue with their wording. "Making a deposit" and "transferring money" are two different types of financial transactions.
- flak48 7y agoThis meltdown also exposed a bunch of embarrassingly poor engineering / design practices with several fintech startups. 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.
- nwsm 7y agoEmbarrassing but not surprising. Billion dollar startups do not operate like billion dollar companies. That's kind of the point, but the valuation is very misleading when it comes to expectations like this.
- pkaye 7y agoWhat is UPI transactions?
- captn3m0 7y agoIts a mobile banking platform in India, which enable money transfers b/w Bank accounts as well as to various merchants on the platform. PhonePe, the leading UPI-provider app was running it with Yes Bank as the partner, but the bank went down.
- mkagenius 7y agoso NEFT?
- sfifs 7y agoNo there's a separate system for NEFT. UPI is a central bank mandated payment gateway standard. It runs on top of an instant settlement system called IMPS. Implementations tend to be very low cost but there's a cap on transaction size. 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.
- livealife 7y agoMillions of users are affected by this meltdown since PhonePe, an Indian payments app has partnered only with Yes Bank while it's competitors partnered with multiple banks.
- kamaal 7y agoI was about to ask the same question. I use PhonePe a lot, will be nice if they come up with a solution soon. PhonePe is a cool app, which a lot of people, especially small time vendors accept. I pretty much use PhonePe for everything these days.
- captn3m0 7y ago>while it's competitors partnered with multiple banks. 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)
- thrwaway69 7y agoAlready a revival plan in action: https://economictimes.indiatimes.com/industry/banking/finance/banking/rbi-announces-draft-revival-plan-for-yes-bank-here-are-details/articleshow/74512979.cms https://economictimes.indiatimes.com/industry/banking/financ...
- ph2082 7y agoI think exposure to Jet Airway, DHFL and IL&FS screwed them. They were not able to recover from them till now. I was still hoping turnaround considering lot of people are using "PhonePay", but you never know.
- ashishb 7y agoI have mentioned this issue to multiple fintech entrepreneurs in India that they can launch a private fdic like insurance. They can charge different premiums for each bank effectively producing health ratings for those banks.
- toast0 7y agoPrivate depository insurance is possible, but what makes the FDIC insurance feel secure is that it's a promise from the government to pay, and the government has 'unlimited' dollars to pay with. Additionally FDIC membership is basically compulsory for US banks, and the FDIC has the authority to shut down a bank in case it's unsound. 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.
- captn3m0 7y agoAny faults with the DICGC approach? They do publish details about premiums in the annual reports (last report is still pending, sadly)
- ashishb 7y agoThe amount insured by DICGC is only 5 lakh (500K) INR which is nothing.
- nafey 7y agoAs a person currently working in fin tech industry in India, I had the opportunity to closely watch the situation unfold at the ground level. There is a lot of disarray as Yes Bank powers a lot of innovative payment systems across India. Feel free to ask me questions if you have been affected by Yes Bank outage or have any general questions related to payments industry impact.
- hi41 7y agoYes Bank was handling more than 40% transactions in India. One would expect the bank to be very profitable. Why does the bank have financial woes that caused the central bank to take over the bank?
- nafey 7y agoA lot of transactions that happen in India (especially UPI transactions) have very small value and are not able to make a bank profitable by itself. Lending is a major driver of success for banks in India currently. 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.
- flak48 7y ago40% of UPI transactions which are typically much lower value than say B2B transactions via RTGS etc. Also the per transaction fee is nil or negligible and not comparable to the percentage fee charged for card payments. 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.
- deskamess 7y agoLooks like a bailout is going to happen and the State Bank Of India is involved.
- soamv 7y agoUh, that's a pretty bad HN edit on the headline -- only one bank is "melting down". The headline should be "India's Yes Bank meltdown..."
- sfifs 7y ago@mods - could you please edit the headline to "India's Yes Bank's meltdown..." There's actually a big bank in India called "Indian Bank" that is not affected here.
- rixrax 7y agoHow is Indias banking sector faring otherwise besides Yes?
- ashleshbiradar 7y agothere's a bad loans crisis in multiple banks, which have been placed under the scanner of the Central Bank. A couple banks collapsed, bunch of them got taken over, others were merged.
- captn3m0 7y agoThe NIFTY Bank index is still at +4.6% for the last 1 year period. 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.