The Centre invested Rs 250 crore with private lender Yes Bank in the financial year 2019-’20 even though the Reserve Bank of India had deemed the bank as risky in 2018, shows the financial statement of the Prime Minister’s National Relief Fund.
The investment in Yes Bank Fixed Deposit Receipts was made even as Finance Minister Nirmala Sitharaman last year said that the RBI had been monitoring the bank since 2017.
To put the amount in perspective, the investment was more than the Rs 222 crore the government spent in providing relief measures during the financial year 2019-’20, the National Herald reported.
The RBI had first flagged serious lapses in Yes Bank’s governance in 2018. It then repeatedly pulled up the bank for under-reporting its non-performing assets, which stood at 7.4% as of September 2019.
In March 2020, the RBI had imposed a moratorium on Yes Bank, suspended its board and appointed a new chief executive officer. Under the moratorium, Yes Bank was not allowed to pay any depositor more than Rs 50,000 without written permission from the RBI during the period of moratorium.
On March 9 last year, two clearing firms – NSE Clearing and the Indian Clearing Corporation – had announced that the bank guarantees and fixed deposit receipts issued by Yes Bank were no longer valid. The status of the Centre’s investment in fixed deposits will, however, be known only after the financial statement for financial year 2020-’21 is released.
Clearing firms are affiliated to stock exchanges and oversee the handling of settlement and delivery of transactions between two entities.
“The government should have invested in a public sector bank instead of a private bank which has already been cautioned by the RBI,” public finance economist Arun Kumar told the National Herald. “Why wasn’t the Rs 250 crore put with a large bank like State Bank of India because this money was contributed by every citizen of our country with a belief that it would be used for relief against natural and other calamities?”
Congress spokesperson Supriya Shrinate said questions must be asked why the government put money in Yes Bank when it was aware of what was happening in the bank.
Limited-time offer: Big stories, small price. Keep independent media alive. Become a Scroll member today!
Our journalism is for everyone. But you can get special privileges by buying an annual Scroll Membership. Sign up today!