The Yes Bank Scandal: A Systemic Failure Needing Immediate Accountability
The liquidity crisis faced by Yes Bank is more than just a financial stumbled step; it is a broader systemic failure that needs to be addressed urgently. The various stakeholders involved – mutual funds, banks, and government-linked companies – seem to have played critical roles in facilitating a well-articulated scam that has routed people's hard-earned money into the businesses at the cost of their own financial well-being.
Exposure of Yes Bank Debt Mutual Funds
The Yes Bank issue is a culmination of several factors. Nippon India Mutual Fund's holdings in Yes Bank show a significant exposure. Specifically, the debt mutual funds under Nippon India have a substantial amount invested in Yes Bank's debt:
Nippon India Strategic Debt: INR 20,53 Cr Nippon India Credit Risk: INR 4,930 Cr Nippon India Equity Hybrid: INR 7,867 CrThe total exposure of Nippon Reliance Capital, a subsidiary of Reliance Capital, to Yes Bank debt is INR 14,850 Cr. Furthermore, the direct or indirect exposure of Yes Bank to Reliance Adag, the promoter of Reliance Capital, stands at INR 14,000 Cr. This substantial flow of money through banking channels underscores the systemic nature of the issue and the collaborating roles of various financial institutions.
Central Banker's Role and Regulatory Failures
The reluctance to identify a specific individual to blame for the Yes Bank debacle further highlights the systemic nature of the problem. The failure of the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) to effectively regulate and monitor such activities contributes significantly to the breakdown. The complications that emerged are the result of a collaborative effort rather than isolated missteps by an individual entity.
Dynamic of Bank-Linked Companies and Mutual Funds
Another significant contributor to the Yes Bank crisis is its exposure through non-banking financial companies (NBFCs) like DHFL to ILFS debt, a shadow banking scam promulgated by banks themselves. ILFS, a major player in the construction sector, is backed by three government-backed banks. This interconnected network of banks, mutual funds, and vehicle companies has manipulated the movement of money, enabling higher earnings and liquidity during the economic boom period of 2008-2014. However, post-2014, the industry and world economy's downturn created exponential effects on Yes Bank's balance sheet, similar to what many other banks, both government and private, face.
Consequences for the Public
In the final analysis, it is the common people who stand to lose the most. Those who have invested or lent money through debt or equity in Yes Bank or to businesses connected through their debt funds are likely to suffer significant financial losses. While depositors may eventually receive their money back, the long-term economic and financial stability of their investments is deeply compromised.
Given the systemic nature of the Yes Bank scandal, it is imperative that the RBI, SEBI, and other regulatory bodies take responsibility and implement stringent measures to prevent such occurrences in the future. The public must be aware of the risks involved and the importance of robust regulatory frameworks in safeguarding their financial interests.