Trouble at Yes Bank
That the road to banking reforms promises to be bumpy is evident from the trouble at the private sector Yes Bank, where the RBI has intervened, putting a cap on deposit withdrawals and appointing as administrator an official from the public sector State Bank of India. The crisis comes months after a similar situation surfaced at Punjab & Maharashtra Cooperative Bank Limited, raising doubts over the way banks in the private sector are regulated, and dipping public confidence in financial institutions. The incident also comes weeks before the government is set to put in place its plans for the consolidation of 10 public sector banks into four mega state-owned lenders, amid concerns over the deadline of April 1 being met for want of regulatory approvals. The focus of banking reforms has mostly been on the public sector, faced as it is with mounting non-performing assets and loan defaulters, diverting critical liquidity from more deserving causes and sectors.
The country is facing a slowdown and the banking sector reforms aim to give a fillip to the micro, small and medium enterprises (MSME), extend the outreach and restructure credit to boost growth. The tenure of the present government has seen major policy upheavals in the shape of demonetisation and the implementation of the GST from which the economy is yet to recover. Even the ATMs had to be recalibrated to dispense the new currency notes, taking time and entailing great public inconvenience.
Like in the case of the PSU banks, those in the private sector should be monitored strictly to prevent unscrupulous practices and asked to give details about their assets and liabilities, risk assessments and future projections. Modernisation of banks has brought about a qualitative change in people’s lives by cutting down on hassles and the reforms aim at enhanced access and service excellence programme using technology to look out for early warning signs. Banks in the private sector too should not be out of its ambit. While financial inclusion is the aim of the government, firm action is needed to check the irregularities.
