Chidambaram terms SBI's investment in Yes Bank 'bizarre'

Former Union Finance Minister P Chidambaram on Saturday (March 7) said the Yes Bank fiasco was caused by the “mismanagement” of financial institutions under the BJP government while questioning accountability in the matter.

“Who authorised grant of new loans after March 2014? Were RBI and the government not aware that Yes Bank was on a loan-giving spree? Did no one in RBI and government read the balance sheet of the Bank at the end of every year?” he asked.

At a press conference, the Congress leader demanded that the RBI conduct a thorough probe in the crisis.

Related news: Evaluating draft reconstruction scheme for Yes Bank: SBI chief

He also said that it was “bizarre” for State Bank of India to invest ₹2,450 crore to pick up a 49-per cent stake in the crisis-ridden bank under a government-approved bailout plan.

“Resolution plan proposed by SBI for Yes Bank is bizarre when the bank’s net worth is perhaps 0. It would be better for SBI to take over on RBI’s order with Yes Bank’s loan book at ₹1 and to assure depositors that their money will be returned,” he said, adding that “SBI is not a volunteer in the rescue act just like the LIC was not a volunteer in the IDBI rescue act.”

Related news: SBI has expressed interest in investing in crisis-hit Yes Bank: RBI

Chidambaram said that it is difficult to digest the fact that no one noticed the loan giving spree Yes Bank was indulging in. He said that the spree “isn’t banking but buccaneering.”

“Notice the jump from March 2014 to March 2019, loan book was allowed to grow, despite supervision by RBI and government at 35% a year. Also notice the spike in 2016-17 and 2017-18, two years after demonetisation. Is no one in RBI or govt accountable? How did ₹55,000 crore loan book in March 2014 jump to ₹2,41,000 crore in March 2019 when I was not the Finance Minister?” Chidambaram questioned.

Chidambaram also asked why did nothing change after the Yes Bank CEO was replaced and a new one appointed in January 2019 and why did nothing change after a former deputy Governor of RBI 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 Jan-March 2019,” he asked.

Related news: Yes Bank lent money to stressed firms like Essel, DHFL: Sitharaman

Chidambaram said the government and the finance minister would wish the story to vanish from the media, but despite their best efforts, mismanagement of financial institutions by the BJP government will be an issue that will remain in the public domain and be debated extensively.

“The best judge of the management of the economy is the market – not the FM nor any ex-FM nor any newspaper. Even allowing for the effect of the coronavirus threat, it is noteworthy that yesterday Sensex fell by 884 points,” Chidambaram said.

He noted that the price of an SBI share fell by Rs 18 and the Rupee to USD declined by 54 paisa (-0.74 per cent). “The price of a Yes Bank share fell from Rs 36.80 to Rs 16.15,” he said, adding that “actually it is worthless”.

Related news: FM must explain jump in Yes Bank’s loan book, says Chidambaram

“I stated yesterday that a better option would be for SBI to take over, under orders of RBI, the loan book of Yes Bank at one rupee and an obligation to assure all depositors that their money is safe and will be returned. 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 Governors C Rangarajan and Y V Reddy,” the former finance minister said.

A day after imposing a 30-day moratorium on Yes Bank and capping withdrawal limit at ₹50,000, the RBI on Friday evening issued a draft reconstruction scheme for the private sector lender.

(With inputs from agencies)