‘SBI Rescue Plan is Bizarre’: P Chidambaram on Yes Bank Fiasco

“Were government, RBI not aware that Yes Bank was in a loan giving spree?” asked Congress leader P Chidambaram.

File image of Congress leader P Chidambaram.

(Photo: PTI)

Congress leader P Chidambaram on Saturday, 7 March, termed as ‘bizarre’ the plan to have SBI invest Rs 2,450 crore to revive Yes Bank. He was addressing a press conference at Congress headquarters in New Delhi along with party spokesperson Randeep Surjewala.

“The plan appears to be that SBI will invest Rs 2,450 crore to pick up a 49 percent stake in the restructured capital of the bank at a price not less than Rs 10/share, face value, Rs 2. This is bizarre when the net worth of the bank is perhaps zero,” he said.

Chalking out a solution to the crisis, he added:

“A better plan would be for the SBI to take over on the orders of RBI, the loan book of Yes Bank at Re 1 and an obligation to assure all depositors that their money is safe and will be returned.”

P Chidambaram, Congress leader 

“Simultaneously, SBI should make every effort to recover as much as possible of the outstanding loans. There are other options that can be explored in consultation with former RBI Governors, Dr Rangarajan and Dr YB Reddy,” he added.

Demanding accountability from the ruling BJP and the RBI regarding the Yes Bank crisis, Chidambaram cited a massive jump in the outstanding loans Yes Bank recorded between March 2014 to March 2019.

The former finance minister pointed out that while in March 2014, the outstanding loan recorded by Yes Bank was lightly over Rs 55,600 crore, in 2019, the number amounted to a whopping Rs 2,41,400 crore.

“Please notice the jump from March 2014 to March 2019, the loan book was allowed to grow despite banks were provisioned by RBI and government at the rate of 35 percent a year. Please also notice the spike in 2016-17 and 2017-18, the two years immediately following demonetisation.”

P Chidambaram, Congress leader 

Questioning who authorised the grant of new loans after March 2014, Chidambaram added that were the government and RBI not aware that Yes Bank was in a ‘loan giving spree’?

“No one in the RBI or government read the balance sheet of the bank every year. Why did nothing change after the CEO was replaced and a new CEO appointed in January 2019? Why did nothing change after a former dy governor of the RBI, who was appointed to the board of Yes Bank in May 2019? Why did the alarm bells not ring when Yes Bank reported its first ever quarterly loss in the quarter of January-March 2019?”

Adding that the ‘Yes Bank fiasco is only a part of the mismanagement of financial institutions under the watch of the BJP govt’, the Congress leader stated that as of December 2019, the total impaired assets of the banking sector stood at Rs 16,88,600 crore, which amounted to 15.7 percent of the total advances.

He also stressed that as of December 2019, gross NPAs stood at Rs 9,10,800 crore and this too may have been underestimated as the number could rise once the moratorium on declaring assets of SMEs is lifted on 31 March 2020.

‘Mudra Scheme Generated Rs 17,000 Cr NPAs’

In April 2015, PM Modi launched the Pradhan Mantri MUDRA Yojana (PMMY) scheme. Under this, loans up to Rs 10 lakh have been provided to the non-corporate, non-farm small or micro enterprises.

P Chidambaram stated that under the MUDRA scheme, about Rs 2 lakh crore have been written off so far. “Beside generating an NPA of Rs 17,000 crores in the 4.5 years since its inception,” he said.

Quoting data cited by Finance Minister Nirmala Sitharaman in Parliament, Chidambaram stated that the amount involved in frauds in banks and select financial institutions increased from Rs 10,171 crore in 2013-14 to Rs 1,42,068 crore in first three quarters of 2019-20.