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Letter to BS: RBI should revisit audit of all banks and flag bad assets

In all the cases involving failure of banks, it is the common man who has to go through unwarranted stress.

Business Standard 

YES Bank
YES Bank. Photo: Shutterstock

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, 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 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

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First Published: Mon, March 09 2020. 22:14 IST