“Yes Bank rescue: India’s TARP moment?” by Tamal Bandyopadhyay (March 9) made an interesting read. One observation in the article stands out: “Over the past year, whenever a new large bad asset surfaced in banking system, Yes Bank has been exposed to it.” This is one area that needs to be explored. There has been reports of risky asset cases being approved for large fees upfront, being shown as income. This source of income helped shore up the bottom line in the previous years.
Usually, auditors are very strict when it comes to advances. But when it comes to income, not much credence is given to the sources. “Outliers” on the income front should be flagged by the auditors and thoroughly investigated. These “outlier” sources of income could well be the seeds of toxic assets. It would be worthwhile if the Reserve Bank could revisit the audits of all the players in the market to check if they have any income, which are of a “deviant” variety. The assets behind these cases should be flagged. In the Yes Bank case, let us hope the steps being contemplated by the government are finalised soon and the moratorium lifted.
In all the cases involving failure of banks, it is the common man who has to go through unwarranted stress. While the Deposit Insurance and Credit Guarantee Corporation will now take care of deposits up to Rs 5 lakh, a sizeable amount of money belonging to individuals who hold more gets lost. It is this fear that caused a lot of depositors exiting.
Yes Bank in the last couple of months. There should be provision to rank the interests of individual depositors above other creditors. On the sale of assets of beleaguered organisations, the first right should be that of individuals. Only after claims of individuals are settled should those from other entities be entertained. This way individuals would not have to go around opening accounts in multiple banks.
K V Premraj, Mumbai
Letters can be mailed, faxed or e-mailed to: