1/5: My 2-bits, #YesBank is not about Public Sector vs Private Sector conduct. Governance issues are ownership neutral – the whole financial ecosystem needs better risk management & disclosures, auditors, boards, CRAs, supervision.
2/5: #YesBank doesn’t take away the need for PSB reform. PSBs have 12.7% GNPA Sep19. GOI has infused INR 3.5 lakh cr capital in PSBs the last few years. Reforms such as P J Nayak are required to get babus and netas out of day-to-day banking, and give PSBs professional autonomy.
3/5: #YesBank shows we need closure on FRDI. Perhaps fully protect small depositors, but leave room for bail-in of big boy deposits. Implicit blanket RBI/ GOI protection of big corporate deposits makes for very poor risk management – both by banks and by large depositors.
4/5: We need better contingency planning. Thursday is a bad time to announce a moratorium. Friday saw confusion amongst FX, derivative, LCs, BGs, CCIL/ exchanges, margins, SMEs. The reconstruction proposed isn’t convincing. Need better prep and a comprehensive contingency FAQ.
5/5: Finally, this isn’t a one-off. There is trust deficit around bank/ NBFC/ HFC NPAs. Solutions exist. One path could be acknowledgement, one-time holistic solution (bad bank? TARP?), followed by tough bank/ governance/ market reform. Need acknowledgement, decisions, closure.
