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Yes Bank Fiasco: Trouble in Financial Market is Contagious With Risks Spread Far and Wide



Effects of Yes Bank Failure

Shimla-For a few years now, the Indian financial sector doesn’t make good reading. It all started with the constant increase in the NPA (non-performing assets), that stressed the balance sheets of the banks. As a result, several banks were put on Preventive corrective measures by the RBI. Soon the NBFC’s (shadow banks) were also in trouble, as for them liquidity became an issue.

ILFA(Infrastructure leasing Financial Services) became the first causality, soon India Bulls, HDIL(Housing Development and Infrastructure Ltd.) and DHFL(Dewan Housing Finance Corporation Ltd) followed. Now trouble has reached the securities market: Franklin Templeton Mutual Funds closed six of its funds worth Rs 25000 crores a few days back. Moreover, there is no clarity, as yet, when, and how much money investors will get back.

We should have realized two things: trouble in the financial market is contagious and in the financial market, risks are spread far and wide.

But before we could do so, first PMC (Punjab & Maharashtra Co-operative) bank collapsed soon after Yes bank– India’s 4th largest Private bank- also tumbled. For PMC bank it was a case of putting its all eggs in one basket: 75 % of the PMC bank loans were given to HDIL; one the other hand, Yes Bank went on reckless loaning spree to the big corporates like Anil Ambani group, Vodafone, IL&FS, DHFL, Essel Group. When the borrowers defaulted the payments, the bank took to creative accounting to hide its bad loans.

Initially, both these banks have been put under moratorium by the RBI; Yes bank soon come out of moratorium as the 8 Financial institutions- lead by State Bank of India-invested Rs 12,550 Crore in the capital to bail out the bank.

As a cleanup task, Yes Bank declared the result for the period October to December 2019 last week. Its bad loans stood at a staggering Rs 40709 crore, out of these whopping Rs.39501 crores (97%) is due from large and mid-size corporates.

The Gross NPA stood at 19%, whereas the net NPA was at 6%. The additional tier-1 bonds worth Rs.8415 crores issued by the bank would also be fully written down as per the Basel norms, Yes bank informed in a separate disclose.

These figures reflect the precarious situation Yes Bank is in. And it will be a challenge of enormous proportion- in spite having found the investors for a bailout- for the bank to restore the faith of its customers. Post moratorium Yes Bank could face a massive outflow of deposits -after all, the baking business has its foundation on trust.

The fiasco puts the entire financial sector in the dock. Also, this underpins the various issues like governance, compliance, auditing, quid pro quo plaguing our financial sector. Questions should also be asked of the regulator too, whether they could have read the writing on the wall much earlier, and acted accordingly. Also, such incidents put a big question mark on the regulatory mechanism in place. But in the case of Yes Bank many knew all was not well for the last few years-timely intervention of the regulator could have made the difference.

Once again, the theory that private sector banks are immune to banking irregularities been thrown out of the window. In fact, after this incident, the misgivings about the modus operandi of the private banks are under a serious cloud, considering the impact it has on the entire market.

COVID-19 pandemic forced the Government to enforce nationwide lockdown which completely strangled the economic activities, forcing millions out of jobs and stymied the income levels. As per reports, Systemic Invest Plan (SIP) subscription has declined up to 70 percent in the month of March. And for the first time in FY20, closure of SIP has crossed 6,00,000 mark. The closure request of SIPs is like to go up, given the impact of COVID-19, economic slowdown and salary cuts. As the majority of the SIPs funds are linked to salaries, going forward, other Mutual Funds will be under immense pressure, considering that salary cuts will lower the saving capacity of the salaried class.

In the coming days, we could see a further spike in the default of the corporate and retails loans. Although, RBI has deluged the market with liquidity, demand for credit will remain lukewarm considering the present economic scenario. Hence, banks may be left with no choice but to park funds with RBI under reverse report.

The battle for the revival of Yes bank had just begun, in the coming days it seems, we will have to fight for the & resurrection of the entire financial market. However, at the moment, we have more questions than answers. Only time will tell whether we get enough answers to restore our faith and trust in financial sectors.

Amid these challenges, the environment of uncertainty, askance in the financial markets connotes further trouble. A pensive mood in the society is not a harbinger for financial markets. The response of the regulators in the coming months will be interesting to see-will they conform to paroxysms of populism or bite the bullet and embrace pragmatism. We will see soon.

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India’s Revised Vaccination Policy and Supreme Court’s Role Behind This Change in Approach




india's revised vaccination policy

Shimla-Free vaccine to all Indian citizens above 18 years of age would be available from 21st June onwards, the Government of India announced yesterday. The Centre has also announced that private hospitals would not be able to levy arbitrary charges for vaccination and the rate would be fixed. The government also rolled back its policy for procurement of vaccines, which was under heavy criticism not only from the opposition but also from the Supreme Court of India.

Though, the Centre claimed that the roll-back was a result of the demands raised by state governments, but some believe this decision came right after harsh judicial scrutiny of the government’s previous policy by the Supreme Court, whose initiation is being lauded by the citizens of India amid this pandemic.

“Many states came forward with a demand for reconsideration of the vaccination strategy and for bringing back the system that was there before 1st May,” the Centre said while defending the rollback.

Also, the Centre was even objecting to the court’s jurisdiction in matters related to policymaking and had termed it as an encroachment on the jurisdiction of the executive. However, very mindful of its jurisdiction, the court had mitigated this allegation of the Centre by explaining how policymaking is subject to judicial scrutiny. The court made the Centre aware of the ‘dialogic judicial review’, where the Court can question the executive and demand justifications from it over non-conformity of a policy to the constitutional rights.

Furthermore, the Supreme Court had grilled the Union government over its faulty and discriminatory policy as states were left on their own for the procurement of vaccines. In its orders passed on May 31, a bench comprising of Justice DY Chandrachud, L Nageswara Rao and S Ravindra Bhat came down heavily upon the central government. The bench had termed the policy approach as “arbitrary and irrational”  because it did not provide free vaccination for the 18-44 year age group.  The bench had sought clarification on policy and dual pricing in which states were being made to procure vaccines directly from the manufactures and were invariably paying more for vaccines while the Centre procured the same vaccines at lower rates.

“Due to the changing nature of the pandemic, we are now faced with a situation where the 18-44 age group also needs to be vaccinated, although priority may be retained between different age groups on a scientific basis. Hence, due to the importance of vaccinating individuals in the 18-44 age group, the policy of the Central Government for conducting free vaccination themselves for groups under the first 2 phases, and replacing it with paid vaccination by the State/UT Governments and private hospital for the persons between 18-44 years is prima facie arbitrary and irrational” a bench observed while passing an order on May 31, 2021 concerning a Suo moto case on “Re-Distribution of Essential Supplies and Services During Pandemic”.

Further, the court had also expressed concerns over the digital divide which would make accessing vaccine equally difficult for a large section through online registration.

Earlier, in its orders passed on April 30, the bend had observed that this policy approach would be “detrimental to the right to life and health”. The bench had also observed that this policy requires rethinking, as it needs to be formulated in conformity with the provisions of Articles 14 and 21 of the Indian Constitution.

The bench aggressively went on to order the government to share all details of the vaccine purchase and distribution, as well as provide information on how the budget allocated for the vaccination (₹35,000 Crores ) was used.

Provisions of the New Vaccination Policy

  • Procurement of 25 per cent vaccinations which was earlier with states will now be undertaken by the Government of India.
  • The government of India will buy 75 per cent of the total vaccines produced and will provide it to the states free of cost. No state government would be spending anything on vaccines.
  • The system of 25 per cent vaccines being procured directly by the private hospitals will continue. Private hospitals can’t charge more than 150 rupees service charge over the decided price of the vaccines.

The Centre said that this policy would be rolled out in two weeks.

“In two weeks, the Centre and states will make necessary preparations as per new guidelines,” the Centre announced yesterday.

Till today, more than 23 Crore vaccine doses have been administered in the country.

To ward off the embarrassment caused by such a contentious policy which was not conforming with the constitutional rights of the citizens, Prime Minister Narendra Modi, without referring to the judicial review, blamed it on the state governments.

“As the corona cases started declining, questions arose about the lack of choice for states and some people questioned why the Central government is deciding everything,” he said.

“India’s vaccination program was run mostly under the Central government. Free vaccination for all was moving forward and people were showing discipline in getting vaccinated when their turn came, amid all these demands for decentralization of vaccination were raised, the decision about priority to certain age groups was raised. Many types pressures were exerted and certain sections of media took it as a campaign,” the PM said.

But with that being said the role of the judiciary in making the government roll back its policy in the interest of the people is being lauded as the victory of judicial review. Also, it has attracted positive response for the apex court which was being alleged of evading several matters related to the public interest under the pressure from the current political regime.

Pradhan Mantri Garib Kalyan Anna Yojana Extended  Till Deepawali.

In another major announcement, the Central government announced the extension of the Pradhan Mantri Garib Kalyan Anna Yojana till Deepawali.

As per the announcement, till November, 80 crore people will continue to get a decided amount of free food grain every month.

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Art & Culture

Wah Re Corona: Himachali Folk Artist’s Lyrical Satire is Factual Rendition of India’s Agonizing Catastrophe



wah re corona

Shimla-Otherwise blatantly vocal and distinctively mass-mobilizing government of India is suddenly in the most subdued self after its proclaimed victory over the deathly virus; participation in uncontrolled election rallies; and permitting maha melas. The stalwarts are in the hiding, while helpless citizens – who voted them into power not once but in landslide victories twice – are dying due to lack of oxygen, poor – unavailable – medical facilities, and the denial stance of the ignorant in the helm.

Drawing a comparison between the fatal coronavirus and the mismanagement of the entire situation by the appalling government; a Himachali folk artist has released a factually appropriate lyrical satire that will tickle your mind and leave you to imagine what has brought this catastrophe onto us. The song is written by Rameshwar Sharma and music by Lalit Sauta. 


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With Neighboring States Going to Curfew, Himachal’s Tourism Sector Again Comes to a Halt



curfew in himachal pradesh

Shimla-Himachal Pradesh Government may not have imposed restrictions on tourist movement, but the industry is facing the heat of second wave of coronavirus pandemic, which has now reached an alarming level.  Alarmed by massive spike in new cases and fatalities, Delhi yesterday imposed a curfew for six days. 

Further, with neighboring states including Panjab and Haryana going into a lockdown-like situation with the imposition of weekend curfews, tourist influx in Himachal Pradesh has dropped drastically, hitting the tourism industry in Himachal Pradesh. Last weekend the hotels claimed the occupancy was almost zero. The hoteliers and other stakeholders said the current situation is similar to what they faced during the lockdowns last year. After lockdowns spoiled the peak tourist season of the last year, the industry is hardly in a position to take another blow, hoteliers said. 

Conditions in Himachal are no better. In 19 days of April month alone, the state has recorded over 14,000 cases and the infection has claimed 155 lives, which is a massive surge in a very short duration. The rates of the surge in new cases and fatalities have also been recorded to be much higher as compared to the previous year.

The state government on Monday said that all educational institutions of the State would remain close till May 1 2021, and faculty of schools, colleges and universities wouldn’t have to come to duty.

The State Government also decided to put a complete ban on transfers of field functional staff.

Right after getting a nod from the Centre, the state government had also postponed the board and UG examinations.  Further, the HP Board of School Education is reportedly mulling over promoting class 10 students.

Chief Minister on Monday also said that the government could take more decisions to contain the spread in the meeting to be held on April 22. Some media reports said that the state government has hinted at the imposition of a curfew. While interacting to media yesterday, Chief Minister had also said that there are no plans for a complete lockdown, but if the situation continues to worsen, a curfew can be imposed. The Chief Minister had been maintaining that a lockdown would be the last resort as it would hurt the tourist influx, thus, cause economic damages.  

However, if the businessmen and hoteliers are to be believed, currently keeping the state open for tourism is hardly providing any relief. Moreover, they are not able to differentiate between a curfew and lockdown. They have begun to seek relief from the state government.  

On the other hand, in case the state decides to impose a curfew, the situation would get quite difficult for the poor, especially migrant workers, daily wagers, and small street-side vendors too.  

Further, fear of the collapse of health infrastructure haunts the state as the government is still in the phase of passing directions to the officers to enhance the bed capacity in the hospitals.  As per the statement given by Chief Minister on Monday, the state is yet to take steps to ensure the proper availability of oxygen and staff.

“Steps would be taken to ensure the proper availability of oxygen and medical staff in the State.  Bed capacity would be enhanced in Nerchowk Medical College, IGMC Shimla, Zonal Hospital Dharamshala, Tanda Medical College, Sunder Nagar Hospital and various other hospitals. Health workers would be posted in appropriate number for the care of Covid-19 patients,” Chief Minister said.

Chief Minister is being condemned for not completing make-shifts hospitals during the lockdown period along with strengthening the health services the way the it was required.

With the re-notification of Shimla’s DDU hospital- one of the busiest in the state- as a dedicated COVID care hospital, the OPDs has been closed. With the ongoing surge in new cases, more hospitals are likely to be re-notification as dedicated COVID care hospitals, and regular OPDs would be closed for other daily patients.

Moreover, for setting bad examples for the people, all political parties and their leaders, including Chief Minister Jairam Thakur, had faced severe criticism over blatant violation of COVID-19 protocols during campaign rallies for the elections to the Municipal Corporations. As a result, the public is hardly taking the second wave seriously and lowering their guards against the infections, which is only worsening the situation.

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