NEW-DELHI, 7TH March 2020: Social Democratic Party of India, (SDPI), is utterly distressed to see one more bank has collapsed leaving the depositors in the lurch. The banking rot which started with the Regulatory Forbearance of August 2008 seems to have come full circle.

SDPI national general secretary Abdul Majeed in a statement, said that it is however satisfying to note that the Reserve Bank of India, (RBI), has announced a draft ‘Scheme of Reconstruction’ that entails the State Bank of India (SBI) investing capital to acquire a 49% stake in the restructured private lender, Yes Bank. However, the decision to suspend normal business operations raises several worrying questions, both about the health of the banking sector, and the adequacy of the oversight role that regulators essay. Abdul Majeed said that it has become a practice of the government to blame others when it finds it going tough. The incompetence is visible at every stage of governance. The NPA of financial sector is going to explode in coming days as more businesses are closing down due to various factors including uncertainties in the global situation. Unless the economy of the country starts growing India itself might need to bailout from IMF.

Where is governance when incompetent people manage the system, asked Abdul Majeed. Neither the RBI governor nor the Finance Minister is an expert manager of finance. It’s their association with and their loyalty to the ruling party that brought them to their positions. Citizens who voted for BJP are now getting tired of this old slogan of blaming Congress and UPA for all the misdeeds. The Finance Minister has become an expert in this exercise.It is worth mentioning here that in April 2018, the RBI under Dr. Urjit Patel had flagged the “highly irregular credit management practices, serious deficiencies in governance and a poor compliance culture” in Yes Bank. The Narendra Modi government replaced Dr. Urjit Patel with a lackey with no knowledge of economics as the RBI governor. When RBI still had teeth, a few months before Urjit Patel’s ouster from the RBI, they had objected to the reappointment of Rana Kapoor as Yes Bank’s CEO citing serious compliance and governance failures. After Patel’s departure, Modi ensured that Rana Kapoor got reappointed immediately, Abdul Majeed pointed out.

Abdul Majeed hoped that the banking system, regulators, and the government learn the right lessons from the crisis, and the government moves from post mortem to pre-emption in the future. A lot will depend on how the rescue is implemented in the next 30 odd days and beyond. In the present situation, a temporary take-over of Yes Bank appears to be the best possible option to prevent borrower runs and other spill-over effects.