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Yes Bank Scam
Last year, before festival of Diwali, Punjab & Maharashtra Cooperative Bank (PMC) fraud was revealed. The Reserve Bank of India (RBI) immediately put stringent curbs on withdrawal, leaving depositors in dark. The Reserve Bank of India directed PMC Bank, not to do any business for six months and capped depositor withdrawals at Rs1,000, (subsequently raised to Rs40,000). The depositors of PMC Bank took to streets to protest, eight depositors have died since, but till date no bail-out has been announced. Now, Just before the festival of Holi, large private sector bank- ‘Yes Bank’ has gone bust, thanks to Non performing assets (NPAs). The government was quick to assure the depositors that all their money is safe. The largest public sector bank- SBI has taken the lead in rescuing this private sector bank. However, SBI is itself plagued with NPAs. No prizes for guessing that honest tax-payers will eventually pay the bill. The buck does not stop here. This bail-out will open Pandora box -more private sector banks will indulge in more fraud (and fail), thereafter seek a bail out from the government (read tax payers). Surely, RBI must be held accountable for the continuous gross regulatory failure. But who will bell the cat?
Editorial in yesterday’s Dainik Jagran came with the heading-“Failure of Regulatory system”. Read on-“ The government owned – State Bank of India has come forward to bail our Yes Bank, a private sector bank. This has raised hope that Yes Bank will be rescued & people’s money will be safe. However, despite hope, Reserve Bank of India and Government cannot escape from questions. For quite some time, news was continuously pouring about had health of Yes Bank..Why strong steps were not taken against founder of Yes Bank….this means proper monitoring of Banking institution is not being done. …The assertion of Finance Minister of India Nirmala Sitharaman might be correct that previous government is responsible for ill health of banking sector, but she has to reply to question that what has the present Modi government done in last five & a half years? …It is difficult to state that merger will solve the problem. It is not a good sign that majority banks are still struggling with the problem of NPAs..”. (9 March 2020).