RBI to start on reconstruction plan for Yes Bank within moratorium period: FM Sitharaman

New Delhi [India], Mar 6 : Union Finance Minister Nirmala Sitharaman said on Friday that the Reserve Bank of India (RBI) will bring in a reconstruction plan for Yes Bank within the moratorium period of 30 days so that the depositors do not face any issues.

"While our government is committed so that the interests of the depositors are completely safeguarded, equally we want the RBI to ensure that the due process of law is followed to ensure that who led to this problem in Yes Bank," she told reporters at a press conference here.

Sitharaman said that State Bank of India (SBI) has expressed a willingness to invest in Yes Bank. "The deposits and liabilities will continue unaffected as before. Employment and salaries are assured for at least one year."

Sitharaman said that the RBI has been monitoring issues relating to Yes Bank since 2017.

"The RBI noticed that governance issues were of serious concern. There was definitely a culture of weak compliance. There were wrong asset classifications together with risky credit decisions. Since RBI started getting clear indicators, they took some concrete steps which they have informed about," she added.

Since 2004 when Yes Bank was formed, it has been under the same management. In September 2018, RBI said that the leadership should change. A new CEO was appointed in September 2018 as a result.

Also, the cleng up of the bank started. The promoter who was asked to let go of his shares had asked for more time.

"He was compelled to let go of his shares on the insistence of RBI. In the meanwhile, investigative agencies pointed out malpractices of some of the members of their top leadership. A member resigned after CBI tightened the noose," said Sitharaman.

In March 2019, the new CEO started working in collaboration with RBI to clean up the bank. A Rs 1 crore fine was levied on Yes Bank in March 2019. SEBI also started an investigation in September 2019.

A former deputy governor of RBI was appointed on the board of Yes Bank. A Chief Financial Officer was also newly appointed. By September 2019 the stakes were completely sold by ex-promoters, she added.

"All this while, promises were made by Yes Bank that they are making efforts at equity infusion but nothing materialised. Periodically, RBI was also informing us that they have given them more time so that the bank's healths may be restored," said Sitharaman.

"But once in November 2019, when it was clear that there is no hope for them to get any more money and when Chairman of the Audit Committee also resigned in January 2020, that is the time we actively engaged with the RBI," she added.

"I have asked RBI to assess where the problem is in this issue. I have also asked the RBI to tell me about the adequacy of the extent of regulatory norms and supervisory norms. I have also asked the RBI to act so that the due process of law takes its course with a sense of urgency."

Sitharaman named Amb Group, Essel Group, DHFL, IL&FS, Vodafone as some of the stressed corporates that Yes Bank was exposed to even before 2014. She also pointed out the UPA regime's shortcomings in the 2004-14 period which led to the crisis in the Indian banking system.

"I say this as the opposition is pointing a finger at us. The Indian banking system has had severe crises, thanks to the UPA government that functioned between 2004-2014. I have reasons to put the blame on that regime," said Sitharaman.

"The so-called self-appointed competent doctors are blaming us today but they handled the United Western Bank in their regime. It was on the verge of collapse in 2006. It was forcefully merged with IDBI then," she said.

"Their solution led to IDBI Bank also losing its moorings. Global Trust Bank was merged with the Oriental Bank of Commerce in July 2004. How many people did the UPA government take action on," she asked.

( With inputs from ANI )