The Yes Bank Collapse Has Exposed The Ugly Face Of Indian Banking, Again

No cash in ATMs, nearly forty people waiting for their turn to get some cash in the line and the lady cashier, wearing a mask, unable to satisfy the customers; another employee trying to pacify an enraged depositor by saying that everything will be normal in a day or so. This was the scene in a local Yes Bank branch in Panchkula, a Haryana town in the periphery of tricity Chandigarh, on March 6, 2020, at nearly 3:40 PM.

The queue of people were the depositors at Yes Bank, which has gone deeper in the ditch due to wrong policies adopted by the bank and failure of the central government, causing the watchdog RBI to smell the mephitis of the system well in time.

An officer, sitting on the side seat and having no nameplate, seems frightened but says, “Sir, it’s true that ATMs and net banking are not functional at present, but we are paying everyone up to the marked limit of ₹50,000 in cash. We are having no dearth of cash, but due to Central Government and RBI guidelines, we are bound to maintain this limit till April 3.  SBI is ready to buy the stakes of our bank and everything will be OK very soon.”

When asked why the position of Yes Bank has deteriorated, the officer said, “Sir, banks also do business and every business has the risk. Some loan portfolios financed by us went bad and the result has given us the jolt. Sir, our finance minister has also assured  to watch the interest of the depositors.”

After the incident of the Punjab & Maharashtra Cooperative (PMC) Bank failure, once again, one more public money collectors, Yes Bank, in this case, has shown the ugly face of the Indian banking system. It has shattered the belief of lakhs of people who deposit their hard-earned money in the banks to keep it safe and secure.

But, it has also unmasked how bank regulators including RBI and NABARD, management, internal auditors and statutory auditors are not serious and keep their vigilant eyes closed.

The above-mentioned auditing and checking authorities which are responsible for curbing problems in banking, should be kicked off with a hard hit. If they can’t even notice or smell the internal health of banks during their off-site and on-site inspection and audit period, then what kind of surveillance are they keeping?

What Does The Finance Minister Say?

Assuring the depositors as well as employees of Yes Bank, Finance Minister Sitharaman at a press conference said“Employment, the salary of employees of Yes Bank assured for one year; deposits, liabilities will be unaffected.”

She also divulged that Essel, DHFL, ILFS, Vodafone were some of the very stressed corporates whom Yes Bank’s loans had advanced. The FM stated that the RBI had noticed governance issues and weak regulatory compliance at the bank, along with faulty asset classification and risky credit decisions.

“We have been monitoring the situation. Now that RBI has come up with a plan, a resolution will be found at the earliest. I want to assure the depositors and investors that both the RBI and the government are looking into the issue. There is no need to panic, their money is safe,” Sitharaman assured.

Will the assurance of Finance Minister bring a glare of hope on gloomy faces of the depositors and employees of Yes Bank?

A current account holder of Yes Bank, harassed by the decision of levying a cap of ₹50000 on all withdrawals,  says, “I am to make the salary payments on March 10 to the poor workers employed in my small factory, from where should I pay? Assurance doesn’t fill the belly. If the FM is so much confident to revive the financial corona affected bank, then why she is stopping the depositors money? She should stop further advancements only.”

Addressing an event organized by the Indian Banks Association in which EASE 3.0 was unveiled on Wednesday, February 26, 2020, Finance Minister Nirmala Sitharaman, annoyed with the slow advancement by Public Sector Bank, pulled up PSU banks on poor branch level connections with customers, which is affecting the credit push. She added that the branch-level connect of the PSU banks with customers is not as it was earlier.

But before scolding the staff of PSU banks, the FM should look into the causes. Why are PSU bank staff losing connections with customers? Why are PSU bank employees not financing with the speed desired by the FM?

The FM should not force the PSU banks to finance with bullet speed and keep in mind that speed thrills, but kills. Now, the speedy financing has shown its results at Yes Bank.

Former Finance Minister P Chidambaram raises the question, “When overall bank credit during the above period grew by about 10 per cent, how did YES BANK’s loan book grow by about 35 per cent?”

Reacting on Sitharaman’s comment that PSU bank staff is losing connections with the customers, a retired banker asks, “Why the salary of the public sector bank employees has not been revised since November 2017? Why they are forced to go on strikes even for their routine salary revision? Why the retirees of Regional Rural Banks are still deprived of their pensionary benefits in letter and spirit as decided by the Supreme Court of India? Has the FM ever even thought of the results of such a negative attitude of the central government?”

Now, SBI is considering to invest ₹2450 crore by buying a 49% stake in the troubled bank. Will it not be a forced step of the government to stake public money and hard-earned profit of the same SBI, which is being run by the employees whom the Finance Minister is scolding?

The All India Bank Employees’ Association has raised the question over the role of RBI and demanded to make them answerable and accountable.

The General Secretary of the Association, CH Venkatachalam in a press release dated March 6 says, “RBI, being the regulator, cannot be unaware of the ongoings in Yes Bank. RBI cannot extricate itself from responsibilities. The government must make RBI answerable and accountable.”

Demanding the nationalisation of all private banks, Mr CH Venkatachalam adds, “One by one private banks, which are glorified by the government, are failing. It is high time that the government should take a call and repeat 1969. All private banks should be brought under the public sector. Peoples’ money is for peoples’ welfare and not for private loot.”

But, who listens to cries in the wilderness?

Featured image for representation purpose only.
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