
Indian bank's meltdown takes out several popular services - jmsflknr
https://techcrunch.com/2020/03/06/indias-yes-bank-breakdown-disrupts-walmarts-phonepe-among-a-dozen-other-services/
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fareesh
Normally 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.

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duxup
Wouldn'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?

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fareesh
In 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.

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duxup
Ah thank you.

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flak48
This 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.

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pkaye
What is UPI transactions?

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captn3m0
Its 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.

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mkagenius
so NEFT?

~~~
sfifs
No 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.

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_Understated_
>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!

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sumanthvepa
Same problem with the back button. Techcrunch seems to be deliberately
attempting to disable the back button.

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fastball
Presumably it's just tracking layers in between the link and the actual
article?

With adblock on, my back button works just fine.

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sumanthvepa
Yup you're right. On initial click it takes you through a bunch of tracking
redirects. Subsequent visits don't show that behavior.

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nafey
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
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?

~~~
flak48
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
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.

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ksec
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.

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JumpCrisscross
Oh 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
How does one "make a deposit in your name" if you did not have an account
already?

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soared
Most 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
That'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.

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sfifs
@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.

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livealife
Millions 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.

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kamaal
I 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.

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captn3m0
They are back up now.

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livealife
Yes, as of now PhonePe temporarily shifted to ICICI Bank( An Indian Private
Bank) as it's partner.

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soamv
Uh, 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..."

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thrwaway69
Already a revival plan in action:
[https://economictimes.indiatimes.com/industry/banking/financ...](https://economictimes.indiatimes.com/industry/banking/finance/banking/rbi-
announces-draft-revival-plan-for-yes-bank-here-are-
details/articleshow/74512979.cms)

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farseer
Are all deposits insured? It seems they have placed restrictions on
withdrawing more than $600.

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threqwer34234
The deposit insurance is technically only about Rs. 1.00.000 (~ $1500)

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ashkulz
It 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.

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sn41
Thank you for that information. It makes much more sense now why these zombie
banks are allowed to remain around.

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ashishb
I 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.

~~~
captn3m0
Any faults with the DICGC approach?

They do publish details about premiums in the annual reports (last report is
still pending, sadly)

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ashishb
The amount insured by DICGC is only 5 lakh (500K) INR which is nothing.

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deskamess
Looks like a bailout is going to happen and the State Bank Of India is
involved.

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ph2082
I 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.

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rixrax
How is Indias banking sector faring otherwise besides Yes?

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captn3m0
The 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.

