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

Did Modi promote Dholavira, a UNESCO site now, as Gujarat CM? Facts don't tally

By Rajiv Shah  As would generally happen, Prime Minister Narendra Modi’s tweet – that not only was he “absolutely delighted” with the news of UNESCO tag to Dholavira, but he “ first visited ” the site during his “student days and was mesmerised by the place” – is being doubted by his detractors. None of the two tweets, strangely, even recalls once that it’s a Harappan site in Gujarat.

How real is Mamata challenge to Modi? Preparing for 2024 'khela hobey' moment

By Prof Ujjwal K Chowdhury*  Third time elected West Bengal Chief Minister, Mamata Banerjee is on a whirlwind tour of Delhi, meeting everyone who matters within and beyond the government, the Prime Minister, the President, some Cabinet ministers, Sonia and Rahul Gandhi, several other opposition leaders, et al.

Giant conglomerates 'favoured': Whither tribal rights for jal-jungle-jameen?

Prafull Samantara By Mohammad Irshad Ansari*  The struggle for “Jal, Jungle and Jameen” has been a long-drawn battle for the tribal communities of India. This tussle was once again in the limelight with the proposed diamond mining in the Buxwaha forest of Chhatarpur (Madhya Pradesh). The only difference in this movement was the massive social media support it gained, which actually seems to tilt the scale for the tribal people in a long time.

If not Modi, then who? Why? I (an ordinary citizen) am there! Main hoon naa!

By Mansee Bal Bhargava*  The number of women ministers is doubled in early July from the first term after cabinet reshuffle by the present government led by Narendra Modi. While there were 06 women ministers in the previous term, this term there are 11. The previous two governments led by Dr Manmohan Singh had 10 women ministers in each tenure. Are these number of women ministers something to rejoice in the near 75 years of independence? Yes maybe, if we think that things are slowly improving in the patriarchal system. This change is less likely to achieve gender balance in the parliament otherwise we require more than 11 as per the 33% reservation . This change is also less likely because the men politicians’ inability to handle the country’s mess is becoming more and more evident and especially during the corona crisis. Seems, the addition of more women ministers may be a result of the recent assembly elections where women played a decisive role in the election results. For example

UP arrest of 'terrorists': Diverting attention from Covid goof-up, Ram temple land scam?

By Advocate Mohammad Shoaib, Sandeep Pandey* That corruption is rampant in police department is a common experience. However, there is another form of corruption which devastates lives of individuals and their families. It has now emerged as a common phenomenon that police more often than not register false cases because of which individuals have to spend number of years in jail.

Ganga world's second most polluted river, Modi's Varanasi tops microplastics pollution

By Rajiv Shah  Will the new report by well-known elite NGO Toxics Link create a ripple in the powerful corridors of Delhi? Titled “Quantitative analysis of microplastics along River Ganga”, forwarded to Counterview, doesn’t just say that Ganga is the second most polluted river in the world, next only to Yangtze (China). It goes ahead to do a comparison of microplastics pollution in three cities shows Varanasi – the Lok Sabha constituency of Prime Minister Narendra Modi – is more polluted compared to Kanpur and Haridwar.

Effluent discharge into deep sea? Modi told to 'reconsider' Rs 2275 crore Gujarat project

Counterview Desk  In a letter to Prime Minister Narendra Modi, well-known Gujarat-based environmentalist, Mahesh Pandya of the Paryavaran Mitra, has protested against the manner in with the Gujarat government is continuing with its deep sea effluent disposal project despite environmental concerns.

Buddhist shrines massively destroyed by Brahmanical rulers in "pre-Islamic" era: Historian DN Jha's survey

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".

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.

Gujarat govt gender insensitive? Cyclone package for fisherfolk 'ignores' poor women

By Our Representative A memorandum submitted to the Gujarat government by various fisherfolk associations of the Saurashtra region of Gujarat under the leadership of Ahmedabad NGO Centre for Social Justice's senior activist Arvind Khuman, who is based in Amreli, has suggested that the relief package offered to the fishermen affected by the Tauktae cyclone is not only inadequate, it is also gender insensitive.