The Yes Bank episode: We clearly want more transparency…

How fortunes are changing for RBI. Suddenly, markets have picked up this idea that one lasting legacy of the current regime would be cleaning up Indian banking system. All this while RBI has been telling us all is well with Indian banking system. But now the former Governor says troubles were brewing in early 2000s. So much so far all this analysis and clean-up.

Back to the title of the post. There have been some interesting orders from the central bank where it has refused to extend the tenure of current CEO of Yes Bank. This has been taken as one major decision by the central bank as it is showing mirror to all these revered CEOs of private sector banks.

But then where is the RBI order  for this decision? It is not there on the central bank website. One actually got to know this as Yes Bank informed the Stock exchanges about the RBI decision.  Infact, if one sees the Press Release by Yes Bank, one would be confused as it says the current CEO’s tenure has been extended. It is only when you read other articles you realise that the original plan was to get an extension of 3 years but RBI has only allowed an extension of 4 months till Jan 31, 2019.

Compare this to UK’s FCA which issued this 44 page document  (HT: good friend Pratik) to explain the rationale behind penalising Canara Bank of all banks. 44 page is a bit too much but still one atleast has some idea. Compare this to the information RBI shares on penalising a bank and in Yes Bank case, we know nothing at all.

RBI does a lot of regulation and has a whole history behind it. Even if the current Governor says they do not have enough powers to regulate PSBs, the central still knows much more than us. It should now try and let people understand the rationale behind all these decisions. Analysts should be able to see how the regulation at Private Sector Banks is better than PSBs. Nothing of this sort is known.

Cleaning-up is not just about taking decisions but also telling the people why and how of the clean-up. Over a long run, “the why and how matters” much more as then this process is institutionalised.

 

Advertisements

One Response to “The Yes Bank episode: We clearly want more transparency…”

  1. Should we be worried about IL&FS or LIC? – The Gold Standard Says:

    […] terse communication on the matter, without explaining the decision. See Amol Agrawal’s blog post on […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.


%d bloggers like this: