Letter to BS: Govt needs to focus on revival of banking sector as a whole

I would like to draw attention to the YES Bank crisis. The crisis in the banking system of India became even more critical when the RBI set a withdrawal limit of Rs 50,000 on YES Bank account holders for 30 days. Though the government has assured that the de­positors need not worry and that their money is safe, the government needs to focus on the revival of the banking sector as a whole. During this period, YES Bank will not be able to grant or renew any loan or advance, make any investment, incur any liability or agree to disburse any payment. This is the second time that any bank has been put under moratorium after PMC Bank last November. YES Bank is facing the crisis due to its lending spree. The advances of YES Bank rose 334 per cent between fiscal year (FY)14 and FY19. 

During this period, bad loans multiplied. Many borrowers started defaulting. The bank’s gross NPAs — the loans overdue for more than 90 days — stared at 7.39 per cent as of September 2019, which was again its highest. As all these were taking place, prudent investors sensed trouble, and YES Bank stocks started tumbling.

Now, the SBI has turned out to be a saviour. It will have to hold a 49 per cent stake in the bank, while the existing shareholders are seeing a significant dilution in their holding to 11 per cent. Af­ter the SBI showed interest, the YES Bank stock started recovering.

Pritam Kashyap Dhenkanal

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