By Don Aguiar

Mumbai, March 12, 2020: An element of panic has settled among YES Bank account holders a day after the Reserve Bank (RBI) put restrictions on the fourth largest bank in the country.

YES Bank customers can now withdraw only 50,000 rupees a month. The Finance Minister meanwhile maintains that no depositor would lose their money.

This is not an institutional collapses. What has collapsed is the ethics and values of the people behind and Hunger for Quick Money. The auditors have failed – both internal and external. Reputed Rating Agencies also played their dubious roll, both for Towering Fees and Favor. The promoters and independent directors have failed individually and collectively. Rating agencies have failed and regulators have failed, also…

On one side are those who are committing the fraud. Then there are those who are supposed to, but not detecting the fraud. Then there are those who know what’s happening but are afraid to report and remain silent.

Greed for money, over ambitious aspirations coupled with zero values and ethics is the result of these collapses…

Wonder how many more holes are there in the balance sheet and yet five star reviews are being given and lay investors and depositors are made fools. They are at the receiving side always and waiting in queue for their hard earn money, saved for old age needs. Mostly, during such type of intentional Crashes, Both Depositors and Investors are looted collectively…

Interestingly it looks that Adani Gas had advance information as on February 25 and it requested its customers to stop dropping checks in YES Bank. Bhakt depositors were given jhumlas by the Finance Minister on March 6.

Gujarat based Vadodara Smart City Development Company, which is under Vadodara Municipal Corporation, withdrew 2.56 billion rupees from YES Bank a day before the RBI imposed a moratorium, an official said. He added that the amount, which was a grant from the government, was withdrawn considering the problem faced by YES Bank and transferred to a new account at Bank of Baroda.

Plain luck. Do you really think so? Remember demonetization. Whole of Gujarat knew about it then and now.

The real scam in the way Yes Bank collapsed will unravel if you answer one simple question.

How did the bank grow its loan book by 80 percent between March 31, 2017, and March 31, 2019, when the economy was down, credit demand unusually low with no signs of a pickup in private investment?

After all, that is unprecedented loan growth in times of an investment drought. So, the first question to be asked is which corporate clients benefited from Yes Bank’s 80% loan growth? The second, and perhaps more interesting question, is whether these companies made fresh investments or merely used Yes Bank’s funds to keep their older loans from other banks from turning into NPAs?

How was Yes Bank thriving when other banks were struggling to lend? The answer to this question constitutes the anatomy of a scam which needs serious investigation by a multi-agency probe. Not the kind of symbolic raid that the Enforcement Directorate ED) conducted late on Friday at the residence of erstwhile promoter Rana Kapoor who ran a highly centralised operation in the bank.

The understanding is that Yes Bank’s unusually large loan disbursals were made to already stressed corporate groups, some of whom were named specifically by the FM on Friday. These companies had already gamed the PSU banking system and run up a massive debt which they were struggling to repay. These corporations had enough clout to further game the system by using new bank loans to prevent old loans from being declared NPAs. It was a kind of Ponzi scheme happening on an industrial (pun intended) scale.

Yes Bank may have become a pawn in this elaborate Ponzi scheme, which also involved large non-banking financial companies (NBFCs).

Suddenly there are massive NPAs emerging from new loans given in the last three-four years to support old loans which were already going bad. Good money was being thrown after bad money already committed in badly executed real estate and assorted infrastructure projects.

The government will do well to first acknowledge this problem. Only then will it find the necessary solutions. The collapse of Yes Bank and its takeover by the RBI has come at a particularly bad time when the coronavirus is threatening to shave off 1 percentage point from global growth. A fragile financial system is not what we want at this juncture. The finance minister will do well to build confidence rather than blame the opposition for all the ills.

Says the man with an MA in history! He was brought in after removing Raghuram Rajan (who said no to note ban) and Urijit Patel (who said no to parting with RBI reserves to the government). We should be very afraid and nervous. But the RBI governor says – “Let me assure you that the Indian banking sector continues to be sound and safe.”

Hope the RBI governor knows much history that future India wouldn’t feel ashamed on nowadays Indian Banking sector as how can RBI be safe when MODI government is free to dip its fingers into saving and emergency funds of the country.

Prime Minister Narendra Modi said on Friday at the Economic Time’s Global Business Summit that, “We will stand by the honest … And deal strictly with cronyism.” It is another matter that a key sponsor of the summit was Yes Bank. We have to live with such contradictions, after all.

Do not trust organizations that are flashy, advertise too much, grow too fast and could collapse too suddenly. Lending is a serious business and companies that only believe in pressing the accelerator with no leg on the brakes will meet with serious collapse one day. Cautious Conservative approach is the right approach while lending money. No two thoughts about this.

The present regime has systematically destroyed: BSNL, LIC, MTNL, PMC, HAL, NITI, ISO, EFPO, RBI, AI (by both) YES, HPCL, JET and Indian Constitution. And there is still more to come. Imagine of being someone who flew regularly on Jet Airways, banks with YES Bank, had a home loan with DHFL, a real estate investment company with IL&FS as a creditor, shares with ESSAR Steel and Anil Ambani’s Reliance companies, and makes phone calls on Vodafone-idea.

Extremely strange phenomena are happening these days in our economy that is “Profits are Privatized While Losses are nationalized.” With gun you can rob the bank but now with bank, you can rob million people at a time.

It’s now high time that schools and colleges go back to teach the basics of Indian culture – Satya, Dharma, Shanti and Ahimsa. Time to teach Morals, Values, Principles, Simplicity of life as chapters even in Modern Business Schools so that the generations stand by it and not affected by the Virus of Corruption as we are being affected by coronavirus for shaking hands by giving up Indian culture of a Namaste…

India needs education based on our legacy Values, but not merely literacy.