HISTORICAL FORENSIC ARCHIVE: EMPIRICAL SYSTEMIC RISK BACKTEST. FOR EDUCATIONAL & RESEARCH PURPOSES.
Yes Bank Ltd
YES Bank Collapse Forensic Autopsy
The 27-Month Pre-Moratorium Escalation Alarm
In August 2018, YES Bank reached an all-time peak of ₹404 amid overwhelmingly positive analyst sentiment and broadly bullish recommendations. By March 5, 2020, facing acute deposit flight of more than ₹1.22 lakh crore and severe capital stress, the Government of India, on an application by the Reserve Bank of India, imposed a 30-day moratorium under Section 45 of the Banking Regulation Act while the RBI superseded the board. Subsequent audited disclosures formally confirmed a catastrophic Q3 FY20 net loss of -₹18,560 Cr (with ₹24,766 Cr in provisions) that crashed Capital Adequacy to 4.10%. Flagium’s quantitative engine provided a dual-horizon early warning: detecting provision starvation (F8 SEVERE / Score 30–32 Watch) in September–December 2016 (39 months prior to moratorium), and escalating to Elevated Structural Stress (Score 68 in December 2017 at ₹315, approximately eight months before the ₹404 peak) — exactly 27 months ahead of the March 2020 moratorium (and 15 months before statutory accounting recognized its first net loss in Q4 FY19, following consecutive RBI divergence disclosures).
A rigorous backtest requires strict Point-in-Time (PIT) information availability: inputs must reflect what an investor could actually observe on exchange filing dates, without look-ahead bias or reliance on subsequent restatements. Commercial banks are mandated by the RBI to disclose Gross NPAs, Provisions, and Capital Adequacy (CAR) every quarter. All inputs were ingested strictly from original quarterly exchange disclosures as filed.
Crucially, RBI supervisory divergence findings (₹4,176.70 Cr for FY16 and ₹6,355.24 Cr for FY17) were incorporated strictly after their statutory stock exchange disclosure dates (May 12, 2017 and October 26, 2017 respectively, pursuant to RBI Circular DBR.BP.BC.No.63), not backdated to prior periods. Model weights and thresholds shown here were frozen independently of the subsequent YES Bank outcome; historical observations were then processed sequentially using only information available as of each observation date. The delayed Q3 FY20 financial results disclosed on March 14, 2020 were not used to calculate the December 2019 point-in-time score or the March 5, 2020 moratorium signal; the scores reflect strictly information publicly available by each applicable observation date. The score progression within the Critical Siren regime (88 in Dec 2019 → 86 on March 5, 2020 → 88 on March 14, 2020) reflects pure point-in-time calibration: the March 5 score reflected observable market and regulatory events (deposit contraction and moratorium), while the subsequent re-escalation to 88 incorporated the formal statutory confirmation of the -₹18,560 Cr loss and 4.10% CAR disclosed on March 14. Flagium's banking engine moved from Provision Starvation (F8 in late 2016, 42 months ahead) to Elevated Structural Stress (Score 68 in Dec 2017 at ₹315, approximately eight months before the ₹404 peak) as regulatory divergences were publicly filed.
10-Quarter Forensic Metric Time-Series
Raw tabular accounting data reconstructed point-in-time from statutory MCA/BSE filings. Statically indexable by search crawlers.
| Quarter | Reported PAT | Operating Cash Flow | Risk Index | Auditor Remarks / Status | Active Forensic Flags |
|---|---|---|---|---|---|
| Q2 FY17 | ₹802 Cr | Suppressed Prov | 30 | Unqualified | F7, F8 (Provision Starvation) |
| Q3 FY17 | ₹883 Cr | Prov ₹115 Cr | 32 | Unqualified | F8 (Severe Provision Suppression) |
| Q4 FY17 | ₹914 Cr | RBI Note 18.4 | 35 | RBI Div ₹4,177 Cr | F7, F8 (RBI NPA Divergence) |
| Q2 FY18 | ₹1,003 Cr | RBI Div Note 6 | 51 | RBI Div ₹6,355 Cr | F7, G2 (Repeated Divergence) |
| Q3 FY18 | ₹1,077 Cr | CoF Divergence | 68 | Pre-Peak Stress | G2, F7, F6, F9 (Multi-Flag 27M Ahead) |
| Q2 FY19 | ₹965 Cr | Tenure Curtailed | 56 | RBI Restricts CEO | G2 (Governance Truncation) |
| Q4 FY19 | (₹1,507 Cr) | Prov ₹3,662 Cr | 88 | First Net Loss Shock | F7, F8, F10 (Severe Instability) |
| Q2 FY20 | ₹74 Cr | Deposit Flight | 69 | Wholesale Outflows | F9, F10, F6 |
| Q3 FY20 | Delayed | -₹1.22L Cr Outflow | 88 | Deposit Contraction | F9, F10, F7 (Liquidity Depletion) |
| Q4 FY20 | (₹18,560 Cr) | Prov ₹24,766 Cr | 86 | Sec 45 Moratorium & Admin | Terminal Solvency Moratorium |
* Source: Audited statutory statements, exchange filings, and registered rating releases.
Provisions cut 22% QoQ despite 35% advance growth; F8 & F7 fire into Watch Band (Score 30 / 42 months ahead)
Statutory Note 18.4 reveals ₹4,176 Cr hidden NPAs (followed by ₹6,355 Cr in Oct 2017); G2 Governance flag fires
Multi-flag eruption (G2, F7, F6, F9) at ₹315, exactly 27 months ahead of moratorium & 8 months before ₹404 peak
Provisions spike 6x to ₹3,662 Cr; GNPA reaches 3.22%; Rana Kapoor ousted; Score escalates to 88
Sec 45 moratorium; board superseded; ₹1.22L Cr deposit flight; stock plunges to ₹5.65; -₹18,560 Cr loss confirmed
Triple-Track Visual Divergence: Flagium Risk Score (red line, left axis: 0–100) vs. NSE Stock Price (green line, right axis: ₹) vs. External Credit-Risk Milestones (dashed purple markers). Notice the precise sequence: initial provision starvation into Watch Band (Sep 2016: Score 30) → RBI regulatory divergence disclosures (May 2017) → structural stress escalation (Dec 2017: Score 68, 27 months ahead) → first statutory net loss shock (Mar 2019: Score 88) → Section 45 moratorium & capital collapse (Mar 2020: Score 86).
Multi-Horizon Early Warning Lead-Time Matrix
Explicit separation of initial signals, official regulatory discoveries, structural stress escalation, and statutory loss milestones.
| Milestone Stage | Date / Quarter | Flagium Score | Primary Forensic Trigger | Lead Time to Moratorium | Market Context |
|---|---|---|---|---|---|
1. First Detectable Deterioration | Sept 2016 (Q2 FY17) | 30/100 | F8 Provision Coverage Starvation (provisions cut 22% QoQ despite 35% advance growth) + F7 GNPA Creep | 42 Months (3.5 Years) | Stock traded at ₹240.00; reported PAT grew +18% YoY to ₹802 Cr |
2. Regulatory Divergence Confirmation | May–Oct 2017 (Q4 FY17 – Q2 FY18) | 35/100 | Statutory filings (Note 18.4 FY17 on May 12, 2017 & Note 6 Q2 FY18 on Oct 26, 2017 under RBI Circular DBR.BP.BC.No.63) disclose cumulative ₹10,531.94 Cr NPA divergence (₹4,176.70 Cr for FY16, ₹6,355.24 Cr for FY17); G2 fires | 29–34 Months | Stock rallied toward ₹350 as broader market consensus treated the regulatory divergences as non-recurring adjustments |
3. Structural Stress Escalation (Pre-Blowup Alert) | Dec 2017 (Q3 FY18) | 68/100 | Multi-flag compounding: G2 Governance Shock (CRIT) + F7 GNPA Spike (HIGH) + F6 NIM Compression (MED) + F9 Cost of Funds (MED) | Exactly 27 Months | Stock traded at ₹315, approximately 8 months before the August 2018 peak of ₹404; 15 months before first statutory net loss |
4. Severe Instability & Loss Recognition | March 2019 (Q4 FY19) | 88/100 | First statutory net loss (-₹1,507 Cr) as new management raised provisions 6x to ₹3,662 Cr; GNPA rose to 3.22% | 12 Months | Stock at ₹275.00; former CEO Rana Kapoor ousted by RBI; credit rating downgrades initiated |
5. Solvency Collapse & Terminal Moratorium | March 5, 2020 (Q4 FY20) | 86/100 | Point-in-Time Inputs: Acute liquidity freeze, total deposit flight (>₹1.22 Lakh Cr contraction), and private equity raise failure, culminating in the Central Government 30-day moratorium order (Section 45) and RBI board supersession (Section 36ACA). | 0 Months (Event Horizon) | Stock traded at ₹22.00 (intraday low ₹5.65 on March 6, 2020 / -98.6% wipeout); withdrawals capped at ₹50,000 pending reconstruction scheme |
Post-Event Statutory Confirmation | March 14, 2020 (+9 Days Post-Moratorium) | 88/100 | Post-Moratorium Statutory Disclosure: Delayed Q3 FY20 audit results formally released by the Administrator confirmed the balance sheet collapse with ₹24,766 Cr credit provisions, a record net loss of -₹18,560 Cr, and CAR depleted to 4.10% (CET-1: 0.60%). (Explicitly post-moratorium statutory disclosures; not inputs to the March 5 score). | Post-Moratorium Audit | Yes Bank Reconstruction Scheme 2020 notified; ₹10,000 Cr equity recapitalization executed by SBI and 7 private banks; AT1 bonds written down |
Key Engine Signals & Trigger Factors
Primary forensic signals contributing to the 88/100 peak risk score
Q2–Q3 FY17: Provision Starvation (Score 30–32 / Initial Watch 39 Months Ahead)
While reported PAT grew 10% QoQ to ₹883 Cr, provisions were slashed by 45% (down to ₹115 Cr) despite advances crossing ₹1.17 Lakh Cr. Flagium's F8 flag fired SEVERE, signaling aggressive credit cost suppression 39 months before the collapse.
Q3 FY18: Multi-Flag Eruption (Score 68 / Elevated Structural Stress Exactly 27 Months Ahead)
In December 2017, when the stock was trading at ₹315 (approximately eight months before reaching its all-time high of ₹404 in August 2018), four flags fired simultaneously: F6 NIM Compression (MEDIUM), F7 GNPA Spike (HIGH), F9 Cost of Funds Divergence (MEDIUM), and G2 Governance Integrity Shock (CRITICAL). This escalated YES Bank to Score 68 exactly 27 months ahead of the moratorium — reflecting the severe deterioration already exposed by RBI divergence disclosures, 15 months before the first statutory net loss.
Q4 FY19: The First Loss Shock (Score 88 / Severe Instability)
As delayed credit-risk recognition unraveled post-Rana Kapoor exit, provisions spiked 6x to ₹3,662 Cr, causing YES Bank's first quarterly net loss (-₹1,507 Cr) and driving GNPA to 3.22%.
Q4 FY20: Liquidity Depletion, Terminal Moratorium & Subsequent Loss Disclosure
By March 2020, total deposit flight of more than ₹1.22 lakh crore and severe capital stress left YES Bank unable to service liquidity needs or raise private equity. On March 5, 2020, the Central Government imposed a 30-day moratorium under Section 45 on RBI application and superseded the board. Nine days later, on March 14, 2020, the Administrator disclosed the delayed Q3 FY20 statutory results, confirming massive provision recognition of ₹24,766 Cr, a historic net loss of -₹18,560 Cr, and CAR depletion to 4.10% (CET-1: 0.60%), materially below regulatory requirements.
Reported Financials vs. Structural Reality
Comparison of market consensus / reported earnings against underlying balance sheet indicators.
Historical Stress Progression
Quarter-by-quarter evolution of risk score alongside major corporate and regulatory milestones.
While YES Bank reported an 18% YoY growth in PAT (₹802 Cr), provisions fell 22% QoQ despite loan advances growing 35% YoY. Two flags fired simultaneously in the Solvency pillar: F7 (GNPA Creep - 13.2 pts) and F8 (Provision Coverage Weakening - HIGH, 8.4 pts), utilizing 86% of the banking solvency capacity (30.2 pts) to shift the bank into the Watch Band (Score 30), 42 months before the moratorium.
Gross NPA rose to 1.52% (F7 HIGH). On May 12, 2017, YES Bank disclosed in Note 18.4 to its audited FY17 financial statements an official RBI inspection divergence of ₹4,176.70 Cr in Gross NPAs (and ₹858.04 Cr in provisions) for FY16, pursuant to RBI Circular DBR.BP.BC.No.63/21.04.018/2016-17.
MAJOR PRE-BLOWUP ESCALATION: Exactly 27 months before the March 2020 moratorium, Flagium elevated YES Bank to Score 68 (Elevated Structural Stress). While reported accounting still showed quarterly profits (the first quarterly net loss was not booked until Q4 FY19, 15 months later), serious balance sheet deterioration had already surfaced through consecutive RBI divergence disclosures (₹10,531 Cr across FY16 & FY17). Four flags triggered simultaneously: G2 Governance Integrity Shock (CRITICAL), F7 GNPA Spike (HIGH), F6 NIM Compression (MED), and F9 Cost of Funds Divergence (MED) while the stock was trading at ₹315, approximately eight months before its August 2018 peak of ₹404.
Following RBI's curtailment of Rana Kapoor's tenure on August 30, 2018, the stock declined from its August peak toward ₹183 by September 2018.
YES Bank reported its first statutory quarterly net loss of -₹1,507 Cr as new management increased provisions 6x to ₹3,662 Cr. Gross NPA rose to 3.22% (F7 SEVERE) and Score spiked to 88/100.
With Q3 results delayed, total deposit contraction exceeding ₹1.22 Lakh Cr, and private capital raising failing, the Government of India issued a 30-day moratorium order on March 5, 2020 under Section 45 of the Banking Regulation Act on RBI application. The RBI superseded the board under Section 36ACA and appointed an Administrator, capping withdrawals at ₹50,000.
Nine days after the moratorium order, the RBI-appointed Administrator formally disclosed the delayed Q3 FY20 statutory financial results. The filing revealed catastrophic balance sheet depletion: ₹24,766 Cr in quarterly credit provisions, a record net loss of -₹18,560 Cr, and Capital Adequacy collapsing to 4.10% (CET-1: 0.60%), materially below applicable regulatory requirements.
Forensic Pillar Evaluation
Status across all 6 core analysis pillars in the sector model.
Signal: GNPA surged from 0.46% to 18.87% (F7 SEVERE) following RBI divergence disclosures.
Signal: F8 Provision Coverage Weakening fired SEVERE in Dec 2016 as provisions fell to ₹115 Cr.
Signal: F9 Cost of Funds Divergence fired as wholesale borrowing costs escalated and deposits fled.
Signal: CAR fell from 18.4% to 4.10% (F10 SEVERE), falling materially below the applicable regulatory capital requirement.
Signal: F6 NIM Compression triggered under expensive wholesale deposit refinancing.
Signal: RBI truncated CEO tenure, board directors resigned, promoter pledged 100% of shares (G1/G2).
Key Trigger Signals & Disclosures
Algorithmic trigger conditions and statutory data points.
Pillar 2: Provisioning & Credit Costs
TRIGGEREDProvision Coverage Weakening / Credit-Cost Suppression
Trigger Condition:
In commercial banking, lowering credit provisions relative to an expanding loan book can bolster reported earnings even as underlying asset risk builds. In FY17 Q3, YES Bank cut provisions to just ₹115 Cr against a ₹1.17 Lakh Cr loan book, reporting peak accounting profits. Flagium's F8 flag fired SEVERE in December 2016, placing the bank into the Watch Band (Score 32) 39 months before the March 2020 moratorium.
Pillar 1: Banking Asset Quality
TRIGGEREDGNPA Creep & Shock Escalation
Trigger Condition:
While marketed as a low-NPA corporate powerhouse, bad loans systematically accelerated as corporate exposure (ADAG, Essel, IL&FS, Dewan) defaulted. RBI supervisory inspections forced cumulative NPA divergence disclosures of ₹10,531 Cr across FY16 and FY17, confirming F7's early warning trajectory.
Pillar 4: Capital Adequacy & Solvency
TRIGGEREDCapital Adequacy Severe Depletion
Trigger Condition:
When un-provisioned bad loans were recognized, ₹24,766 Cr of provisions in Q3 FY20 wiped out equity capital. CAR fell to 4.10% (with CET-1 at just 0.60%), materially below the applicable regulatory capital requirement and triggering F10 SEVERE.
Pillar 6: Governance & Regulatory Enforcement
TRIGGEREDLeadership Rejection, Board Resignations & 100% Pledge
Trigger Condition:
Corporate governance decay preceded the financial write-downs: RBI curtailed CEO Rana Kapoor's term in Aug 2018, Chairman Ashok Chawla and independent directors resigned in Nov 2018, and the promoter stake was fully pledged (100%), creating severe vulnerability to lender-driven sales and market pressure. G1 and G2 fired CRITICAL throughout FY19.
Statutory Disclosures & Regulatory Records
Every metric below is extracted directly from YES Bank audited statutory quarterly statements, Basel-III regulatory filings, and Reserve Bank of India inspection reports and orders.
| Parameter & Statutory Figure | Official Statutory Source | Significance / Forensic Impact |
|---|---|---|
Reported PAT (FY17) ₹3,330 Cr | Audited Annual Financials (FY17) | Peak reported profitability while credit provisions were suppressed to just ₹115 Cr in Q3 |
First Statutory Net Loss (Q4 FY19) -₹1,507 Cr | Statutory Financial Disclosures (BSE) | First quarterly loss in bank's history as credit provisions surged 6x to ₹3,662 Cr |
Catastrophic Net Loss (Q3 FY20) -₹18,560 Cr | Statutory Financial Disclosures (Disclosed March 14, 2020) | Historic quarterly loss post-AQR cleanup with ₹24,766 Cr provisions in a single quarter, disclosed post-moratorium by the Administrator |
RBI NPA Divergence (FY16) ₹4,176.70 Cr | Audited Financials FY17 (Note 18.4) / BSE Filing (May 12, 2017) per RBI Circular DBR.BP.BC.No.63/21.04.018/2016-17 | Official regulatory finding confirming under-reported bad loans (Gross NPA assessed by RBI at ₹4,925.68 Cr vs ₹748.98 Cr reported; Provision divergence ₹858.04 Cr) |
RBI NPA Divergence (FY17) ₹6,355.24 Cr | Unaudited Financial Results Q2 FY18 (Note 6) / BSE Filing (Oct 26, 2017) per RBI Circular DBR.BP.BC.No.63/21.04.018/2016-17 | Second consecutive massive regulatory divergence (Gross NPA assessed by RBI at ₹8,373.80 Cr vs ₹2,018.56 Cr reported; Provision divergence ₹1,219.00 Cr) |
Capital Adequacy Ratio (CAR) Dec 2019 4.10% (CET-1: 0.60%) | Basel-III Pillar 3 Disclosures (Disclosed March 14, 2020) | Fell to 4.10%, materially below the applicable regulatory capital requirement, extinguishing CET-1 buffer and signaling severe capital impairment and systemic solvency stress |
Total Deposit Flight (FY19 to FY20) ₹2,27,610 Cr → ₹1,05,364 Cr (-53.7%) | YES Bank FY20 Audited Financial Statements / RBI Disclosures | Total deposits declined from ₹2.28 lakh crore to ₹1.05 lakh crore (contraction of ₹1,22,246 Cr); non-retail and wholesale institutional deposits fled first, triggering severe liquidity freeze |
Promoter Share Pledging (2019) 100.00% of Promoters' Stake | BSE Shareholding Pattern (Dec 2019) | The promoter stake was fully pledged, increasing vulnerability to lender-driven sales and further market pressure |
Government Moratorium & Supersession Order 30-Day Moratorium (Sec 45 BR Act) | Government of India Notification S.O. 993(E) / RBI Press Releases 2019-2020/2022 & 2019-2020/2025 (March 5, 2020) | Imposed by the Central Government under Section 45 of the Banking Regulation Act, 1949 on RBI application; RBI superseded the board under Section 36ACA, appointing an Administrator (Prashant Kumar) |
Reconstruction Scheme Notification Yes Bank Reconstruction Scheme, 2020 | Central Government Notification (March 13, 2020) / RBI Orders | Statutory reconstruction scheme notified under Section 45(7) of Banking Regulation Act, providing governance reconstitution and multi-bank equity recapitalization |
SBI Lead Equity Investment ₹6,050 Cr (48.21% Equity Stake) | Yes Bank Reconstruction Scheme, 2020 / SBI Disclosures | State Bank of India infused ₹6,050 Cr for 605 crore shares at ₹10 each (with mandatory 3-year lock-in for 75% of holding) |
Consortium Bank Equity Participation ₹3,950 Cr Private Capital Infusion | RBI Reconstruction Scheme / Exchange Filings | Seven private lenders infused ₹3,950 Cr (HDFC ₹1,000 Cr, ICICI Bank ₹1,000 Cr, Axis Bank ₹600 Cr, Kotak Mahindra Bank ₹500 Cr, Bandhan Bank ₹300 Cr, Federal Bank ₹300 Cr, IDFC First ₹250 Cr) |
Additional Tier-1 (AT1) Bond Write-Down ₹8,415 Cr Extinguished | Administrator Order / Basel-III Information Memorandum | Basel-III compliant AT1 perpetual bonds worth ₹8,415 Cr were fully written down to zero pursuant to Section 57 of the Reconstruction Scheme to absorb accumulated losses |
Forensic Analysis Takeaway
Key Lesson for Institutional & Public Investors
"YES Bank is one of the clearest historical commercial-banking stress cases in the Flagium archive. A sequential point-in-time backtest from Q1 FY16 through Q4 FY20 demonstrates that YES Bank's structural deterioration left an unmistakable statutory footprint years in advance. Serious deterioration does not begin with the first accounting loss: official RBI divergence disclosures of ₹10,531 Cr exposed severe asset classification discrepancies as early as 2017, consistent with delayed recognition of credit deterioration. Flagium sounded its initial Watch Band warning in September–December 2016 via provision starvation (Score 30–32, 39–42 months ahead) and escalated to Elevated Structural Stress at Score 68 in December 2017 (when the stock traded at ₹315, approximately eight months before reaching its all-time peak of ₹404 in August 2018) — providing exactly 27 months of lead time before the March 2020 statutory moratorium and SBI-led reconstruction (and 15 months before statutory accounting recognized its first net loss in Q4 FY19)."
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