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Yes Bank Crash: Govt Gets Into Crisis Management Mode
The RBI on Friday announced the State Bank of India's intervention into the Yes Bank crash.
The RBI on Friday announced the State Bank of India's intervention into the Yes Bank crash. RBI announced that SBI will have a 49 per cent stake in Yes Bank's shareholding. This measure appears aimed at managing the crisis.
SBI's 49% stake will also boost the confidence of the depositors who constitute the lifeline of any bank. While the Union Finance Minister Nirmala Sitharaman has assured depositors that their money will be protected, the revival may take time.
The RBI had announced on Friday that it would appoint a new board of directors. The freshly appointed board of directors will include a CEO who will function as the Managing Director of the bank.
Depositors and account-holders have been informed that branches and offices will function without any change from the same location. However, it is likely that the RBI might decide to open additional offices or branches.
The Yes Bank crisis is one that unfolded over a period of time, according to banking experts. The government should have seen it coming as reflected by the loss-making state and meagre profits the bank was making, they aver. The bank could not raise enough capital to cover likely losses from loans, they point out.
Moreover, a red flag was said to be the under-reporting of NPAs by Yes Bank to the tune of Rs 3,277 crore in 2018-19. The RBI did intervene at the point, by nominating R. Gandhi, a former Deputy Governor, to the board of the bank, as additional director in May 2019, but clearly, it was a case of too little too late, according to banking analysts.
