THE GIST of Editorial for UPSC Exams : 07 February 2020 (Yes bank, no bank)

Yes bank, no bank

Mains Paper 3:Economy
Prelims level:Yes Bank crisis
Mains level: Measures taken to resolve Yes Bank crisis
Context:

• The SBI will invest in Yes Bank, and hold 49 per cent, paying a premium of up to Rs 8 per share with a face value of Rs 2.

Measures taken:

• Within 24 hours of the superseding of the board of Yes Bank by the Reserve Bank of India, Finance Minister Nirmala Sitharaman announced a reconstruction scheme, which clearly suggests that the State Bank of ............................................

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In-principle decision taken by RBI:

• Having taken an in-principle decision to not let the bank collapse, the most sensible course of action for the RBI would have been to tell depositors their money was safe, and they could withdraw all they wanted the next day.
• Till Thursday evening, when the RBI superseded the board and capped withdrawals, there were no queues outside Yes Bank branches.
• Capping withdrawals for depositors for Yes Bank will only serve to erode the faith of depositors in private banks in general, and the banking regulator, RBI itself, in particular.

It will have two adverse impacts:

• The people will gravitate towards public sector banks which are credit averse, and
• Private banks .................................

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Way forward:

• Its unwillingness to act quickly and decisively even after identification of structural weaknesses is cause for serious concern.
• The troubles of Yes Bank were known for long. Co-promoter Rana Kapoor was forced to step down by the RBI two years ago.
• The RBI put its nominee on the Yes Bank board last May, and in November it found a Rs 3,277 crore divergence in bad loan reporting for the year-ended March 2019.
• Of course, the players are failing their customers. But the RBI is also failing to uphold the people’s trust and faith.

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Prelims Questions:

Q.1)With reference to the scheme launched by Zonal Cultural Centres (ZCCs) under Ministry of Culture, consider the following statements:
1. Shilpgram aims to promote folk and tribal art and crafts of the zone by organizing seminar, workshops, exhibitions, craft fairs, design development and marketing support to the artisans living in the rural areas.
2. Octave aims to promote and propagate the rich cultural heritage of Himachal Pradesh, Arunachal Pradesh, Jammu and Kashmir and Nagaland to the rest of India.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: ............................

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Mains Questions:
Q.1) What is the Yes Bank crisis? Do you think prompt corrective action can remove the crisis?