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As 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

by nafey 7y ago

As 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 ago
Yes 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 ago
  A 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 ago
  40% 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.
  - tialaramex 7y ago
    Self-dealing is a huge red flag. 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.
    - ksec 7y ago
      The BoE giving better rate on mortgage to employees as perks is perfectly fine because the mortgage has collateral priced at a market rate with market interest. Those so call perks are basically Bank not earning interest on its employees. Lending $500M without collateral seems like a completely different thing.
- captn3m0 7y ago
  40% of UPI transactions, not all transactions. There are other payment instruments, and a lot of transactions are just bank transfers (with even lower margins). 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.
frandroid 7y ago
I'm curious to hear about these innovative payments systems...
- nafey 7y ago
  Sure, one example of the offerings of Yes Bank was inter bank transfers api which allowed you to settle money instantly between accounts at great scale. Beyond that there was virtual bank accounts, virtual UPI IDs, e mandates etc. If you are interested in learning about such solutions please feel free to visit cashfree.com
  - ray88 7y ago
    Hey, I checked your website and it seems you also support international payments. Do you offer FIRCs on international payments? These are required legally for service exporters (like a SaaS service), and are very tough to get. Currently payoneer seems to be the only provider which supports issuing an actual e-FIRC without any hassles. But they are not a payment gateway. Stripe issues something like an advice but not an actual e-FIRC. Paypal also only gives an advice and not an actual e-FIRC.

by nafey 7y ago

hi41 7y ago

Yes 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 ago
A 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 ago
40% 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.
- tialaramex 7y ago
  Self-dealing is a huge red flag. 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.
  - ksec 7y ago
    The BoE giving better rate on mortgage to employees as perks is perfectly fine because the mortgage has collateral priced at a market rate with market interest. Those so call perks are basically Bank not earning interest on its employees. Lending $500M without collateral seems like a completely different thing.
captn3m0 7y ago
40% of UPI transactions, not all transactions. There are other payment instruments, and a lot of transactions are just bank transfers (with even lower margins). 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.

frandroid 7y ago

I'm curious to hear about these innovative payments systems...

nafey 7y ago
Sure, one example of the offerings of Yes Bank was inter bank transfers api which allowed you to settle money instantly between accounts at great scale. Beyond that there was virtual bank accounts, virtual UPI IDs, e mandates etc. If you are interested in learning about such solutions please feel free to visit cashfree.com
- ray88 7y ago
  Hey, I checked your website and it seems you also support international payments. Do you offer FIRCs on international payments? These are required legally for service exporters (like a SaaS service), and are very tough to get. Currently payoneer seems to be the only provider which supports issuing an actual e-FIRC without any hassles. But they are not a payment gateway. Stripe issues something like an advice but not an actual e-FIRC. Paypal also only gives an advice and not an actual e-FIRC.