Weak Compliance, Wrong Asset Classification Led To Yes Bank Crisis: Finance Minister

Yes Bank, the country's fifth largest private sector bank, is caught in the throes of a crisis. The Reserve Bank of India (RBI) suspended the board of the beleaguered bank for a period of 30 days "owing to serious deterioration in the financial position of the Bank" and imposed a withdrawal limit of Rs 50,000 for its account holders till April 3. The Finance Minister Nirmala Sitharaman has assured the bank customers that each depositor's money is safe.

Weak compliance culture has been an issue at Yes Bank. In 2017, the central bank noticed governance issues and weak regulatory compliance at the private lender and has been taking corrective measures from time to time, the finance minister pointed out in her press conference.

Wrong asset classification and exposure to stressed corporates such as Anil Ambani Group, Essel group, Vodafone and IL&FS have also been an issue, Ms Sitharaman told reporters in New Delhi.

On discovering risky credit decisions, the RBI advised change in management and accordingly, a new CEO was appointed in September 2018, Ms Sitharaman added.

The finance minister also asked the central bank to assess the problems at the troubled bank and ensure that due process of law is followed with a sense of urgency.

Meanwhile, the RBI has announced a draft revival plan for Yes Bank, whereby the investor bank will buy stake of up to 49 per cent in the troubled Yes Bank.

The restructuring scheme will be fully effective within 30 days, the finance minister said, adding that State Bank of India has expressed willingness to invest in Yes Bank.