Yes Bank fiasco a part of mismanagement of financial institutions: Chidambaram
New Delhi, March 7, 2020
Senior Congress leader and former Finance Minister P. Chidambaram on Saturday hit back at the Modi government over the Yes Bank crisis, saying the fiasco in India's fifth largest private sector bank is only part of the mismanagement of financial institutions under the watch of the BJP government.
Addressing a press conference at the party headquarters, the former Finance Minister said he knew that the government and the Finance Minister Nirmala Sitharaman would wish the story to vanish from the media.
"But, I am afraid, despite their best efforts, the mismanagement of financial institutions by the BJP government will be an issue that will remain in the public domain and be debated extensively," he said.
He thanked the media for raising the Yes Bank issue as it has reached most people who are concerned about the economy.
"The best judge of the management of economy is the market and not the Finance Minister nor any ex-Finance Minister nor any newspaper," he said, adding that even allowing for the effect of the coronavirus threat, it is noteworthy that on Friday the Sensex fell by 884 points, the price of an SBI share fell by Rs 18 and the rupee (to USD) declined by 54 paise (-0.74 per cent).
"The price of a Yes Bank share fell from Rs 36.80 to Rs 16.15. Actually, it is worthless," Chidambaram remarked. His remarks came two days after the RBI superseded Yes Bank's Board of Directors and appointed an administrator, putting a cap of Rs 50,000 on withdrawals by account holders for a month.
The RBI said the bank's board was superseded "owing to serious deterioration in the financial position of the bank".
Former SBI CFO Prashant Kumar was appointed as administrator of Yes Bank, which has over 1,000 branches and 1,800-plus ATMs across the country.
On Thursday, Union Finance Minister Nirmala Sitharaman said the bank was on watch since 2017 and developments relating to it were monitored on a day-to-day basis.
Chidambaram said on Friday he put out some numbers regarding the loan book of Yes Bank. "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?" Chidambaram questioned in his tweet.
"Will the government confirm that the loan book of YES Bank has grown under the BJP's watch as follows: FY2014: Rs 55,000 crore, FY2015: Rs 75,000 crore, FY2016: Rs 98,000 crore, FY2017: Rs 1,32,000 crore, FY2018: Rs 2,03,000 crore and FY2019: Rs 2,41,000 crore," Chidambaram said.
"Notice the jump from March 2014 to March 2019. The loan book was allowed to grow, despite supervision by the RBI and government, at the rate of 35 per cent a year. Also notice the spike in 2016-17 and 2017-18, the two years immediately following demonetisation. Is no one in the RBI or government accountable?" Chidambaram asked.
Slamming the government, the Congress leader asked: "Which committee or who authorized the grant of new loans after March 2014? Were not the RBI and government aware that Yes Bank was on a loan-giving spree? Did no one in the RBI and the government read the balance sheet of the bank at the end of every year? Why did nothing change after the CEO was replaced and a new CEO appointed in January 2019?"
He also asked: "Why did nothing change after a former Deputy Governor of the RBI was appointed to the Board of Yes Bank in May 2019? Why did the alarm bells not ring when Yes Bank reported its first-ever quarterly loss in the quarter Jan-March 2019?"
According to him, the Yes Bank fiasco is only a part of the mismanagement of financial institutions under the watch of the BJP government. He said that, as of December 2019, the total impaired assets of the banking sector stood at Rs 16.88 lakh crore or 15.7 per cent of the total advances. Total write-offs since financial year 2014 have amounted to Rs 7.78 lakh crore or 7.3 per cent of the total advances.
In 2018-19 alone, the write-offs amounted to about Rs 1.83 lakh crore, he said.
Chidambaram said that, as of December 2019, gross NPAs stood at Rs 9.10 lakh crore. "The size of gross NPAs may be understated. The number will rise once the moratorium on declaring stressed assets of SMEs is lifted on March 31, 2020," Chidambaram said.
He also said that the MUDRA scheme has seen a write-off of about Rs 2 lakh crore besides generating an NPA of over Rs 17,000 crore in four-and-a-half years since its inception.
Slamming Sitharaman, Chidambaram said according to the Finance Minister's answer to a question in Parliament, "the amount involved in frauds in banks and select financial institutions increased from Rs 10,171 crore in 2013-14 to Rs 1.43 lakh crore in the first three quarters of 2019-20".
Commenting on State Bank of India's plan to take over Yes Bank, Chidambaram said the plan appears to be that the national bank will invest Rs 2,450 crore to pick up a 49 per cent stake in the restructured capital of the Bank at a price not less than Rs 10 per share (face value Rs 2).
"This is bizarre, when the net worth of the Bank is perhaps zero. We will await details of the plan before we comment further," he said.
"I stated yesterday that a better option would be for SBI to take over, under orders of RBI, the loan book of Yes Bank at one rupee and an obligation to assure all depositors that their money is safe and will be returned," he said.
He also said that simultaneously, SBI should make every effort to recover as much as possible of the outstanding loans.