Yes Bank was struggling to get hands on capital for a long time, allowing the RBI plenty of time to come up with a plan, Rajan said.
Former RBI Governor Raghuram Rajan jumped into Yes Bank debate, reinforcing the burden of accountability on the government for the resolution of the crisis. There was ample time to formulate a plan for Yes Bank crisis resolution, Raghuram Rajan said in an interview to CNBC TV18, adding that it was imperative upon the authorities to have got the plan right. Yes Bank was struggling to get hands on capital for a long time, allowing the RBI plenty of time to come up with a plan, he said. “Yes Bank gave enough notice and it was looking for capital for long. There was enough time to make a plan for it. I hope what we have got is the best available (plan), but I don’t want to second guess, because I don’t know the details,” Raghuram Rajan said.
Yes Bank, which was placed under a moratorium by the RBI last week, will now see India’s largest public sector lender, State Bank of India (SBI) pick up 49 per cent stake in a bid to restructure the struggling private sector bank. Rajan went on to say that the unwillingness to directly take action to clean up the financial sector of the country has prolonged the state of malaise in the economy. “We say that things are getting better and then another firm gets into trouble. First it was IL&FS then Dewan Housing Finance Corporation and now Yes Bank. A clean up needs to be taken up on an emergency basis otherwise the sense of confidence that is needed in our NBFCs, private banks and even state-owned banks will be missing, that means the financial sector cannot contribute towards growth,” he added.
While highlighting the kind of clean up India’s financial sector needs, Raghuram Rajan said, “I mean a clean up in two ways, first make sure the balance sheets are as clean as possible and recapitalised the balance sheets. Second, where there are governance issues, take stronger steps on ensuring that these firms are put on better governance paths.” The former RBI governor, claiming that the process of cleaning up the financial sector was started in 2015, said that five year is too long for the clean up process.
Raghuram Rajan completed his tenure as the RBI governor in 2016 amidst reports that suggested that the government was unwilling to let him continue as the head of the central bank for a second term. In the interview, Rajan claimed that he has been saying for a long time now that the most immediate problem in the Indian market is to clean up the financial sector in a resolute way so that the country can move forward.