Skip to main content

Complete 'negligence' by RBI led to Yes Bank debacle: Financial advocacy group

Counterview Desk
In a "public statement", the advocacy group Financial Accountability Network India, New Delhi, has said that the Yes Bank debacle exposes the Reserve Bank of India (RBI) "failure", insisting on the need to hold those responsible for the debacle "accountable" and move towards "nationalising" private banks.
Endorsed by 30 academics and activists, the statement says that the responsibility for criminal negligence and debacle of Yes Bank "has to be fixed beyond Rana Kapoor", who has just been arrested, and "all concerned need to be brought to book", especially because there were clear signals of things to come.

Text:

Reserve Bank of India has once again failed the depositors of this country by putting Yes Bank under the restrictions for a month and putting the cap on withdrawals. At a time, when Indian banking sector is going through the toughest and longest crisis along with the slowdown in economy, RBI is continuously failing to safeguard the interest of the depositors as the highest regulating body and central bank of India.
After appointing Ravneet Gill as new CEO a year ago, RBI couldn’t come up with any solution to save the bank from going down. And this has come just months after RBI doing the same with Punjab and Maharashtra Cooperative (PMC) Bank and leaving the depositors panicked and worried.
Since last three years, Yes Bank has been making news, all for wrong reasons, for misreporting of accounts for two consecutive years in 2016 and 2017, series of resignations by board members and directors, internal clash between promoters, rising bad loans, non-disclosures, inadequate capital, inability to raise funds, weak compliances and wrong asset classification.
All this time, despite having knowledge, RBI didn’t intervene and take actions against persons responsible for this mismanagement. In September 2018, RBI asked Rana Kapoor, then MD and CEO, to leave the bank at the end of his tenure (January 2019). Ravneet Gill was appointed as new CEO of the bank in March 2019. And later, RBI also appointed former deputy governor R Gandhi as the additional director in Yes Bank’s board.
Interestingly, the bank kept on issuing fresh credit even when it was doing wrong on many fronts. The rise in the loan book from Rs 1,32,000 crore in 2017 to Rs 2,41,000 crore in 2019 clearly shows that RBI didn’t try to stop the bank from further deterioration.
The bank has issued credit to stressed companies most of which have gone bankrupt such as Anil Ambani Group, IL&FS, DHFL, Cox & Kings, Essel, Indiabulls Housing Finance, Jet Airways, CCD and Vodafone. Post the forced ouster of Rana Kapoor, the inaction of RBI is difficult to comprehend and it makes RBI complicit and responsible for the Yes Bank crisis.
In the past, RBI had put eleven public sector banks under prompt corrective action but didn’t do the same with Yes Bank. Now after letting the bank reach to a point of crisis where depositors and small businesses are worried about their savings and businesses, Enforcement Directorate is investigating role of the original promoter Rana Kapoor for diverting funds and money laundering.
We note the arrest of Rana Kapoor and his remanding to the custody of Enforcement Directorate till March 11. The responsibility for this criminal negligence and debacle however has to be fixed beyond Rana Kapoor and all concerned need to be brought to book.
After putting the bank under restrictions for one month, RBI issued a draft reconstruction scheme where State Bank of India (SBI) would invest and buy 49% stakes of the dying bank. SBI led consortium of banks including Life Insurance Corporation (LIC) will invest to save the private bank from collapsing.
But in the case of PMC bank where total deposits of the bank were only Rs 11,000 crore, government didn’t invest/infuse money to save the bank and till this day PMC Bank is under restrictions. Also, the same government promoting privatization of public sector in Economic Survey 2020, is now asking public sector banks to buy stakes of the private bank which is in crisis because of complete negligence by RBI in the first place.
According to govt private banks perform better than public sector banks, yet public sector banks come to help every dying private bank
For a negligence of this level, RBI and the government should be held accountable. Finance Minister in her statement said RBI was monitoring Yes Bank since 2017 and yet it allowed to worsen the situation to a point where depositors are not allowed to withdraw more than Rs 50,000.
Earlier in December 2019, SBI chairman Rajnish Kumar had denied speculations by saying that SBI doesn’t have adequate funds to acquire the debt ridden Yes Bank and suggested Kotak Mahindra as suitable bank to acquire the bank.
Later in World Economic Forum, Rajnish Kumar said Yes Bank won’t be allowed to fail. And now after putting the bank under the restrictions for a month, in reconstruction scheme of RBI, SBI is buying 49% stakes of the bank.
This change in from lack of adequate funds to buying 49% stake, shows that SBI has not showed willingness to invest (as RBI said in its reconstruction scheme) but it is being forced to invest in Yes Bank. According to the government private banks are performing better than public sector banks, yet public sector banks come to help every dying private bank.
The Yes bank debacle once again highlights the multiple crises of private sector banks in India. At a time when the Government is on a privatisation spree, this episode highlights that public finance and banking are the way forward, rather than private banks.
Financial Accountability Network India demands that the government should take criminal action against Yes Bank’s management responsible for this debacle. For the inactions and role played by RBI, the government should do an independent inquiry on RBI’s functioning role as regulator of banks.
And when public sector banks are the last resort to save any loss-making private bank, government must nationalize all the private banks in the country. To avert repetition of such crisis, Reserve Bank of India should ask scheduled commercial banks to focus on retail banking and Development Financial Institutions should be revived to provide credit for large developmental projects.
---
Click here for signatories

Comments

SAMIR SARDANA said…
IT IS EVIDENT THAT THE QUALITY OF RBI INSPECTIONS IS POOR AND INEFFECTIVE AS IT HAS FAILED TO DETECT,STOP FRAUDS AND TO ENSURE THAT BANK MANAGEMENTS ACT ON THE RBI INSPECTION FINDINGS

https://www.moneylife.in/article/exclusive-rbi-inspection-reports-on-sbi-reveal-evergreening-window-dressing-cover-ups-and-worse/57631.html
https://www.moneylife.in/article/exclusive-rbis-risk-assessment-reports-on-axis-bank-missing-the-forest-for-the-trees/57636.html
https://www.moneylife.in/article/exclusive-rbi-inspection-reports-of-2013-15-on-icici-bank-show-no-clue-of-the-subsequent-storm/57653.html

CONSIDERING THE SPATE OF BANK FRAUDS AND BANK INSOLVENCIES IN INDIA THE NATURE,SCOPE, EXTENT,PHASING,SKILLS OF iNSPECTORS/AUDITORS, FREQUENCY, EFFICACY,EFFECTIVENESS AND FOLLOW UP AND IMPLEMENATION OF THE RBI INSPECTION REPORT AND FINDINGS - IT IS EVIDENT THAT IT IS THE RBI WHICH IS CULPABLE !

THR RBI HAS DELIBERATELY ALLOWWED THIS WAY OF WORKING AS THEY DO NOT WANT TO STOP THE CREDIT FLOW

THE CREDIT BALLOON SAVES THE RBI ! AS THE BALLON EXPANDS THE NPA % LOOKS LESS !

THE FRAUD % ALSO LOOKS LESS !

AND PEOPLE DO NOT DO A RUN ON THE BANKS !

IF THERE IS A FRAUD - RBI BLAMES THE BANKERS !

IF THE CREDIT WERE TO TO DECLINE INR AND SENSEX WILL CRASH - AND THERE WILL BE NO NEED FOR A RBI ! dindooohindoo !

It is that simple

TRENDING

India reaches 8th of 10 stage genocide: US Muslim advocacy group raises 'alert'

By Hena Zuberi* India has reached the 8th stage of genocide with the persecution of the Muslim community. Stating this, Professor Greg Stanton, who heads Genocide Watch, declared a Genocide Emergency Alert for India today at Justice For All online briefing.

Mayawati's 'success' depends on how BSP taps new crop of young Amdekarite leaders

By Vidya Bhushan Rawat*  Whatever be the election results in Uttar Pradesh on March 10, it is extremely important to understand: that the Bahujan Samaj Party (BSP) and its leader Mayawati have the potential to rise like a Phoenix any time.

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

Anti-poor? 'Cumbersome' to link aadhaar, voter ID for people sans internet access

By Prashant Kumar Chaudhary, Ajit Kumar Jaiswal*  At present, technology plays an increasingly crucial part in modelling human existence by offering a variety of solutions to many of the challenges individuals confront in the real world. As a result, every branch of research works to provides means to solve these difficulties precisely and efficiently. The Central government works along the same lines as well.

India's actual Covid death rate about 2500 per million, third highest in world: Study

By Rajiv Shah  There is now well-researched proof, if it can be called that, indicating that the Government of India may have fudged data to show lower Covid death rate. A new paper, published in “Science”, has said that while officially the Government of India’s Covid-related death estimates as of January 1, 2022 – 345 per million population – are one-seventh of the US death rate, the actual analysis of crude death rate in India suggests, this may be a gross underestimation. 

Democratic leaders silently greeting Modi's 'increasingly autocratic' rule: HRW

Counterview Desk The Human Rights Watch (HRW)’s new “World Report 2022: Events of 2021”, claiming to “investigate abuses, expose facts widely, and pressure those with power to respect rights and secure justice”, has identified India as one of the countries where “autocracy is ascendant and democracy on the decline” because of emergence of leaders with autocratic tendencies.

Barbaric, inhuman attack on Odisha villagers to implement JSW project: NGO networks

Counterview Desk  A “solidarity statement" issued by three top civil society networks, Friends of the Earth India (FoE India), Delhi Solidarity Group (DSG) and the National Alliance of People’s Movements (NAPM), has asked the Odisha chief minister to ensure that the “inhumane barbaric attack on the villagers of Dhinkia, Odisha” in order to implement a corporate project.

Gender insensitive? Model Gujarat's cyclone relief package ignores 40,000 fisherwomen

CSJ volunteers talking to fisherwomen By Rajiv Shah  A Centre for Social Justice (CSJ) note on the Gujarat government’s compensation package to the victims of the devastating Tauktae cyclone, which hit the coastal belt of Saurashtra's Amerli, Rajula, Una, and Gir-Somnath districts in May 2021, has said, the relief offered was so terribly inadequate that many of the fisherfolk were not able to fish for the rest of the year.

Holding militant rallies across Punjab, farmers 'forced' Prime Minister to retreat to Delhi

By Harsh Thakor*  The farmers' spirit, elevated and reverberated at a boiling point in Ferozpur like a spark turning into a prairie fire, appears to be behind Prime Minister Narinder Modi having being compelled to retreat to Delhi due to a virtually boycotted pandal. Demonstrations held just ahead of Modi's visit, especially in Firozpur, seemed to have already created tremors in the belly of the ruling party.

Buddhist shrines were 'massively destroyed' by Brahmanical rulers: Historian DN Jha

Nalanda mahavihara By Our Representative Prominent historian DN Jha, an expert in India's ancient and medieval past, in his new book , "Against the Grain: Notes on Identity, Intolerance and History", in a sharp critique of "Hindutva ideologues", who look at the ancient period of Indian history as "a golden age marked by social harmony, devoid of any religious violence", has said, "Demolition and desecration of rival religious establishments, and the appropriation of their idols, was not uncommon in India before the advent of Islam".