Distressed assets

Why Yes Bank’s bailout has panicked markets

State Bank of India’s agreement to buy Yes Bank stems from the central bank’s aspiration to maintain trust in the country’s financial system. However, as bank share prices and deposits fall, not everyone is reassured.

State Bank of India SBI, the nation’s largest state-owned financial institution, along with a six private sector banks that includes Housing Development Finance Corporation HDFC, Kotak Mahindra Bank, and Axis Bank will together account for a 75% ownership of Yes Bank, the fourth largest private sector bank in India following a near $1.4 billion agreement reached this month. 

The bailout reflects the tasks facing the Reserve Bank of India RBI to write-off distressed assets without inducing a system wide panic. But by allocating both public and private money into the rescue, investors and depositors are now questioning what other dangers lurk within the country’s financial...

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