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  • good evening.

  • Welcome to the big fight.

  • I'm additional short.

  • Well, the big focus that we have today is on the collapse off.

  • Yes, bank.

  • The bank melt down.

  • Perhaps not a collapse just yet.

  • Are the government's assurances to customers of the bank enough to reassure them before I introduce our distinguished madness.

  • Tonight, the R B I has restricted withdrawals from yes bank just ₹50,000 a possum crisis that yes, bank marks the first such instance involving a new age lender in the private sector.

  • The border.

  • The bank has been superseded by the central Bank of decision, taken after serious issues were raised about corporate governance issues on a sharply deteriorating financial situation.

  • Bank customers are aghast at the development on the timing off.

  • The move comes when there are significant strains already on the economy on investor sentiment.

  • For a host of reasons.

  • Our Panelists tonight's debate what the collapse of yes bank means at what this is a part off in the broader economic context.

  • But the question that everybody really wants to know is, why exactly did yes bank collapse on?

  • So let's just run through.

  • A couple of those are key points on the reasons for the collapse off the bank.

  • Firstly, the exposure off yes bank to stress Corporates and this was in fact mentioned by the finance minister, Nurmela Seat Robin groups such as the Until a Bonny group, the SL group, Vodafone and Island F s pre 2014 she said, is a reason why this has all gone terribly wrong for yes bank ah week compliance structure, wrong asset classification, risky credit decisions, allegations off insider trading, our old reasons why she believes that have contributed to the mess in yes bank today.

  • On the point being mentioned by the finance minister was that from 2018 onwards, in fact, 2017 onwards, the Reserve Bank of India and the government had taken note off the fact that there were problems at Yes Bank from 2018 onwards.

  • There was a full fledged effort at oversight and trying to keep tabs on just what was going wrong.

  • Action was taken against the promoter off the bank, but by November 20 19 it appeared that despite the best efforts of the bank, there would be no foreign equity or any other equity coming in on then these steps, which have been taken now, all of the steps the government is very clear to mention are in a finite time period beyond 30 or days.

  • Things should work out once again for those who stand to lose the most, and that is basic depositors in the bank.

  • But that's an overall introduction off the situation.

  • I'm going to introduce my Panelists Sanchez Mukherjee CD a private wealth manager.

  • Thanks very much for being with us.

  • Amitabh Dubey, a policy coordinator on the political offer at the Congress Party and a political analyst, will be joined by Gotcha Linda's, the Economist momentarily Bishop departed area, former country head of Indian financial banking at Ian's at Greenlees, Mother and sub Nervous.

  • The chief economist of CARE ratings joins us as also the former director of the Reserve Bank off India VIP in Malik.

  • I'd like to thank all of you for joining us.

  • The first part off the show is called The First Bunch.

  • We give you one minute to summarize some of your thoughts before we begin the big fight Such a that you first.

  • Thank you, Vishnu.

  • See, I think if one were to look at this entire issue.

  • I think the move by the government was a very sharp move on as permit was very timely because the primary intent off the government in this situation was to keep yes bank as a going concern.

  • The move was done purely from the interest off depositos so that there's not a run on the bank money or run on the bank.

  • Money situation is a very, very grim situation, right?

  • So I think the more or less managed to avoid avoid this kind of a crisis on its kept it as a going concern as we I have stepped in to take 49% so they'll be close to run.

  • My understanding is 2500 crores of cash infusion on a 49% stick.

  • Ah, which will have the capping off the equity share for FBI close around ₹10.

  • That's ₹2 face value with a trapeze premium.

  • Now, a lot of esteemed Panelists hell might argue on the timing saying that why wasn't this done?

  • Oh, Leo.

  • So that might be a question that can come up for debate, and I'm happy to discuss that.

  • My only thing is you know here.

  • When you're taking a very objective perspective off a very large bank, let's understand, it's a private sector enterprise.

  • I'll interrupt you there.

  • You've got one second.

  • I took away two seconds.

  • Any army?

  • The finance minister's comments underline once again that she and her government are more interesting, pinning blame on previous governments and actually doing anything during their six years in office, particularly the financial sector, where the approach has bean far short of what mean what's needed to be done.

  • All of the cases she mentioned off bad loans went downhill during this government's tenure on this is yet another example off it, a ce faras.

  • The bailout plan is concerned.

  • One thing that everyone your viewers should understand is that the equity value off this bank is almost zero.

  • So the question is, why's S B I being forced to inject at least 2500 crores and upto 12,000 crows off its own equity to prop this back up?

  • What what is needed is a bailout for depositors, not for creditors and not for shareholders using money that belongs to taxpayers and be on this important going to minority shareholders in State Bank of India whose money is now being used.

  • Toa bailout?

  • Yes, bank.

  • So And this is potentially in violation.

  • Off seven rules.

  • This has to be explored.

  • But ah, government that is looking to disinvest 2.1 lack.

  • Crows of equity cannot go around punishing minority investors in this manner.

  • Okay, Mister Panta, area your one minute, sir.

  • You see, it's very important to sustain the confidence off the depositors in this crisis.

  • And banks have failed in past.

  • We have the example of Global Trust Bank.

  • We have other examples.

  • Bank off Credit and Commerce International, which was taken over by state bank banks, will fail in future if the manpower, which is running India's largest industry for socioeconomic development, are not up to the mark.

  • Uh, may I just see that?

  • Ah, this will be a test case.

  • The announcements which have been made on the manner in which RV has acted so far yes, are on the right track.

  • But talks don't count for anything.

  • Okay.

  • What matters is the performance.

  • And if this experiment to bail out each and every depositor Yes.

  • So your time is, Ames fails.

  • Yes.

  • Finished yourself?

  • Why not PMC depositors all right.

  • Why not?

  • BMC depositors Mother and seven of its chief economist at care ratings.

  • Your first punch.

  • One minute to make your first points.

  • Go ahead.

  • No.

  • In fact, I think the U.

  • S bank episode actually shows very clearly that the problems off NPS in the banking system in October it started off with a PSB is dead if it into the private banks.

  • And just at the point of time, where we felt that the problem was behind us on the 2021 will be a fresh here.

  • I think this particular issue has come up, but I think the electric team in which both the government and the FBI have reacted is very, very positive because it's in the right signals to the public that we will not let any particular bank feel so notwithstanding what went wrong and without disturbing done earlier or not.

  • I think what's really important is that the r B A and the government have shown that they will not let the bank failed.

  • Deposit told us they're not going to lose money On More importantly, we have proceedings to show that this was what was adopted by the government.

  • Whichever government it works under is the Bank of India, and they will be continued to argue.

  • So I think it restores a lot of confidence in the system.

  • All right.

  • Restores a lot of confidence in the system.

  • The way the government has gone about announcing y it's done what it has.

  • We'll debate that in a moment.

  • Whipping Malik, former director of the Reserve Bank of India, are your 1st 1 minute off arguments?

  • Go ahead, Mr Malik.

  • Yes, thank you.

  • But the psych director Barbie, I'm also the chairman of anything comical in four minutes.

  • What is going on?

  • Uh oh, Okay.

  • Uh, my impression is that the management the top management wasa colluded management.

  • They have aggression aggressive in the in.

  • Lending with the lending was without food ends which accumulated into the loan losses of the bank.

  • Andi, as can be seen, that they have invested in tow be to asset management companies 22 s and moment cos of huge amount.

  • Yes, so?

  • So that also triggered in tow, the liquidity crisis.

  • Probably there's a little depresses the bank, and that meant the liquidity, which was 1 25% a year back on 100% is comfortable and hill Day that crisis have brought to a level or that they are unable to pay their deposits beyond 50,000.

  • Alright, So obviously they ran out of money themselves and and had to deal with poor loans.

  • Let me a big begin the big fight on the debate part of the program By looking at the broader issues over here through the labors in Santa, it appears that this was a bank where if you went to the bank and its chief executives in the past, irrespective of what your credentials were, you were given a lord.

  • And if you look at the company's named by the Finance Minister, the until Amani Group Island F s Vodafone, among others, These have been stressed companies for a while now.

  • So therefore, was there an essential fault in this bank?

  • It not figuring out who they were giving money to?

  • Yes, absolutely.

  • I would agree with you.

  • The concern was on corporate governance.

  • The concern was on very poor credit decisions.

  • Ah, bad management, capital allocation, asset allocation and all of that.

  • In fact, I'm not representing any form or any organization over.

  • Yeah, I can just see for myself, at least for my clients.

  • All of us in in this industrial or defies would know that the most well managed equity funds and even the dead funds the good ones that is the well managed once did not have an exporter two years, bank because it was all straws up in the air.

  • A lot of people knew about the issue about yes, bank for a while now.

  • So, uh, this this was impending for awhile.

  • Andi, this was kept under monitoring.

  • And I think now that the situation was that they were unable to do the capital infusion themselves that the government stepped in to keep it as a going concern on made this move off reconstruction.

  • So that was a well thought out move.

  • In my opinion, it was the argument mentioned by the Finance Minister today was that look before 2014 This was the bank that took on all of these bad.

  • These these companies with distressed assets from 2017 onwards, there was a process in place.

  • The promoter had to leave.

  • His shares had to be given up on their four.

  • This is the time in the government needed to act.

  • So the argument that the government didn't act or the R B I didn't act enough or fast enough doesn't stand how you're really looking for excuses for for not doing enough.

  • If you look at the growth of bank credits, compare the UPS to period with the government spirit Bank growth slowed from what 17% of 9%.

  • But yes, banks credit loan book continue to grow at 35%.

  • So, yes, banks loan book was going four times the rate of bank credit growth on as being pointed out by Mr Chidambaram, among others.

  • Their loan book more than quadrupled in the last four years from 298,000.

  • Interestingly enough, the you're of de monetization Yes, Banks loan book grew 55% which is unheard off on the corporate governance issues in this bank are well known, So the question is, you know she can keep talking about what happened in the past, but this story has been playing out in the last five years on dhe.

  • Frankly, not enough has been done about it.

  • But would you agree on it up that from 2017 onwards.

  • Enough was being done that there was, ah, member of the art by who was put on the board off the company.

  • By 2018.

  • They decided that there would be no extension given tow the promoter of this company.

  • He was eased out off the company.

  • So from 2017 onwards, would it have been possible to move any further or faster?

  • These problems have been known well before 2017 on the assets off this bank.

  • The loan, because bank has continued to grow very rapidly.

  • Even during this period, there was an asset quality review on the bank was allowed to continue to evergreen its loans.

  • So really, they have put in some systems in place, but they haven't been very effective.

  • Mr.

  • Sub Davis, Would you like to respond to the point that it's not fast enough?

  • And it's not good enough to say that from 2017 there was somebody in the RV I looking into the functioning off this bank that that a lot needs to have been done a much earlier on this was not done at all.

  • Why should the simple deposited in the bank have to suffer now with all of these restrictions, why was an action taken earlier on and who is responsible?

  • Not if you look at the case off any failed bank and you go back to the reasons as to why it's such a thing has happened.

  • It will always go back to say that certain incorrect decisions were taken, but that could be because of improper judgment or they could be governance issues.

  • So I think it's not fair for me to say that for the governance issue or the absence of proper judgment.

  • But the fact is that at the end of the day, if the bank has these kind of problems, which puts the money of depositors in jeopardy, I think definitely there is something wrong now what it is you're being done before 2017 or after 2017.

  • I think the matter of debate and it doesn't leaders anywhere, but the important part is that something you're making this point.

  • I just just started to interrupt.

  • But I really would like to present you with this point.

  • Why don't we debate why action was not taken earlier on?

  • If corporate governance, which is so central in the bank more than any other place is the bedrock off off how the system works?

  • Why should we not saying from 2014 onwards?

  • What was this bank doing on?

  • Why wasn't there oversight?

  • Now I would like to think that give the benefit of doubt that the bank off India because I think whenever these decisions are taken, the proper authority is the central bank.

  • So I think it was a reserve bank off India which decided team to be in the water a point of time.

  • And at that point of time, you have you change the management, you get your own person on the board of directors and you try to bring about the changes which haven't quite worked out.

  • So I think for any kind of a failed bank, any kind of a failed organization, I think it's very easy for us to say that the Serbian done earlier.

  • Yes, If things were done earlier, probably the problem would have happened earlier, but we should remember at that particular point of time.

  • He had similar kind of problems.

  • A number of public sector banks, some other private sector banks, so just been pointing, saying my buns are not done for us.

  • Bank at that particular point of time may sound very intelligent today, but I think they have followed the due process which has been followed by the central by the Central Bank and today by the government.

  • And I think as long as they're they're addressing issues, I think that should be fairly okay at, for the time being at least.

  • Okay, Mr Malik, the other way of looking at it is that we have a systemic problem.

  • As faras the r B I slashed the government at some level chooses to intervene when a bank is feeling we've had the disastrous PNB situation.

  • We've had the disastrous Maharashtra cooperated bank situation.

  • I know we've got yes, bank, one of the largest banks in the country in this situation.

  • So is it enough for us to say that?

  • Look, the r B I is acting now.

  • The FBI is going to be involved.

  • We, the government has been moving in, and therefore things will become okay.

  • Or is it time for us to understand that the process of oversight in this country for three consecutive banks has been awful?

  • Missus, uh, any institution which is doing shadow banking on when I say shadow banking that they do certain things outside their books are there will be no dressing their balance sheets, which are ordered by a statue, orators on which the less qualifications are no nose and which is which other board, which is.

  • If you see the board is one of the most competent board, our baby has to believe all those things only when certain discoveries are made.

  • And in this case, probably the discoveries were made when shareholders who family members, they started complaining.

  • And that is why they are way started looking in tow, that so blaming the regulator where there is a very systematic fraud.

  • It is very easy.

  • But when you see these, when a regulator starts into a day to their transactions regulating, then it means that that this all these statues writers are internal inspection reports, our internal organs, they're all all fruitless after regulator believes on those reports.

  • So you mean to say that there, Ben should, uh, a few officers to anybody everybody could see that invaded Florida is happening or not?

  • All right, so you had independence in the working of bags is something that you point out.

  • Mr.

  • Kocharian does joins us as well.

  • Good evening, sir.

  • If you look at yes.

  • Bank stressed Corporates were given loans, governance issues, week compliance, culture, wrong asset classifications, risky credit decisions, allegations of insider trading, all words used by the Finance Minister earlier today.

  • What we have been debating is is accountability in this entire situation.

  • On the point mentioned by Mr Malik is that there is only so much that they are be Aiken dough.

  • They cannot monitor that the day to day of the month to month running off banks.

  • But where does that leave the common deposited in a situation like this when you've got banks evidently out of control?

  • Well, that's a very good question on dhe.

  • The fact is, depositor that safe in this case, Yes.

  • I don't think we have any problem in the deposit safe.

  • The employees are safe, so the vulnerable ah sections are all right.

  • I in fact, investors are safe because they have been bailed out by the state.

  • Looks like they've been bathing in the bank.

  • And in fact, that's a moral hazard.

  • Because investment investor capital equity capital is risk capital and you should not be bailing out risk capital.

  • But this It's a systematic, systemic risk.

  • So I can you can understand why the government has taken this risk.

  • I think now the I'll answer your question.

  • But the key point which I don't know if anybody has mentioned so far, is that state bank on Reserve Bank should come to some kind of agreement, uh, to make sure that the tier one tier toe capital takes a haircut.

  • Right now, the reality is that there, that's where to bring this bank to health.

  • The everybody has to take a haircut.