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

Importance of Bangladesh for India amidst 'growing might' of China in South Asia

By Samara Ashrat*  The basic key factor behind the geopolitical importance of Bangladesh is its geographical location. The country shares land borders with Myanmar and India. Due to its geographical position, Bangladesh is a natural link between South Asia and Southeast Asia.  The country is also a vital geopolitical ally to India, in that it has the potential to facilitate greater integration between Northeast India and Mainland India. Not only that, due to its open access to the Bay of Bengal, Bangladesh has become significant to both China and the US.

Unlike other revolutionaries, Hindutva icon wrote 5 mercy petitions to British masters

By Shamsul Islam*  The Hindutva icon VD Savarkar of the RSS-BJP rulers of India submitted not one, two,or three but five mercy petitions to the British masters! Savarkarites argue: “There are no evidences to prove that Savarkar collaborated with the British for his release from jail. In fact, his appeal for release was a ruse. He was well aware of the political developments outside and wanted to be part of it. So he kept requesting for his release. But the British authorities did not trust him a bit” (YD Phadke, ‘A complex Hero’, "The Indian Expres"s, August 31, 2004)

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.

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".

'BBC film shows only tip of iceberg': Sanjiv Bhatt's daughter speaks at top US press club

By Our Representative   The United States' premier journalists' organisation, the National Press Club (NPC), has come down heavily on Prime Minister Narendra Modi for recent "attacks on journalists in India." Speaking at the screening of an episode of the BBC documentary “India: The Modi Question,” banned in India, in the club premises, NPC President Eileen O’Reilly said, “Since Modi came to power we have watched with frustration and disappointment as his regime has suppressed the rights of its citizens to a free and independent news media."

Chinese pressure? Left stateless, Rohingya crisis result of Myanmar citizenship law

By Dr Shakuntala Bhabani*  A 22-member team of Myanmar immigration officials visited Rohingya refugee camps in Cox's Bazar to verify more than 400 Rohingya refugees as part of a pilot repatriation project. Does it hold out any hope for the forcibly displaced people to return to their ancestral homes in the Rakhine state of Myanmar? Only time will tell.

China ties up with India, Bangladesh to repatriate Rohingyas; Myanmar unwilling

By Harunur Rasid*  We now have a new hope, thanks to news reports that were published in the Bangladeshi dailies recently. Myanmar has suddenly taken initiatives to repatriate Rohingyas. As part of this initiative, diplomats from eight countries posted in Yangon were flown to Rakhine last week. Among them were diplomats from Bangladesh, India and China.

40,000 Odisha adolescent girls ask CM: Why is scheme to fight malnutrition on paper?

By Our Representative  In unique a postcard campaign to combat malnutrition, aimed at providing dietary diversity, considered crucial during adolescence, especially among girls, signed by about 40,000 adolescent girls from over 10,000 villages, have reminded Odisha chief minister Naveen Patnaik that his government's Scheme for Adolescent Girls (SAG), which converged with Pradhan Mantri Poshan Shakti Nirman  ( POSHAN ) 2.0 in 2021, is not being implemented in the State.

Natural farming: Hamirpur leads the way to 'huge improvement' in nutrition, livelihood

By Bharat Dogra*  Santosh is a dedicated farmer who along with his wife Chunni Devi worked very hard in recent months to convert a small patch of unproductive land into a lush green, multi-layer vegetable garden. This has ensured year-round supply of organically grown vegetables to his family as well as fetched several thousand rupees in cash sales.

Over-stressed? As Naveen Patnaik turns frail, Odisha 'moves closer' to leadership crisis

By Sudhansu R Das  Not a single leader in Odisha is visible in the horizon who can replace Chief Minister Naveen Patnaik. He has ruled Odisha for nearly two and half decades. His father, Biju Patnaik, had built Odisha; he was a daring pilot who saved the life of Indonesia’s Prime Minister Sjahrir and President Sukarno when the Dutch army blocked their exit.