March 15, 2020

Corporate Cronyism at its Worst

CPI(M) Polit Bureau has issued the following statement on March 7, 2020

THE collapse of Yes Bank has raised many disturbing questions about the functioning of private banks and the failure of the regulator, the Reserve Bank of India, to intervene in time.  The Yes Bank episode is the worst example of crony capitalism.  The record shows that the loan account of the bank increased spectacularly from Rs 55,633 crore in March 2014 to Rs 2,41,999 crore in March 2019.  The bank was saddled with huge loans given to corporates favoured by the ruling regime.  Some of these corporate debtors like Anil Ambani were backed to the hilt by the Modi government, despite their well recorded precarious financial health.

Even though the shenanigans indulged in by the promoter and the board of the bank were known for quite some time, the RBI did not act in time thereby jeopardising the interests of the depositors. The destructive influence of the current regime based on corporate cronyism on the Indian economy can no longer remain concealed.

Now that the State Bank of India is being asked to buy a stake of 49 per cent in the bank, it is imperative that the bank become a State-owned enterprise. It cannot become a case of privatisation of profits and nationalisation of losses.  Safeguarding the interests of the depositors must be paramount. The RBI should immediately annul the limit of withdrawals set at Rs 50,000.