The recent YES Bank fiasco has once again brought to the limelight the failure of the supervisory role of Reserve Bank of India to keep a tight vigil over banks as per its mandate under Banking Regulation Act, 1949. Not long ago, the Punjab and Maharashtra Cooperative (PMC) Bank was plagued with massive corruption by the promoters of the company causing great anxiety to the depositors of the bank. In the case of yes bank, as reported by national newspapers, the loan to the tune of Rs 30000 Crore has turned into bad loan raising the corporate governance standard in Yes Bank. The Enforcement Directorate (ED) and Central Bureau of Investigation (CBI) have started the preliminary investigation. The ED investigation reveals that not only the loans were sanctioned to the companies/entities with poor balance sheet but huge amounts were siphoned off under the guise of loans to the entities controlled by promoter Mr. Rana Kapoor and his three daughters. What is more worry some is that neither the Banking Regulator that is RBI nor the statutory auditor nor the internal auditor were able to smell the smoke and blow the whistle. The yes bank fiasco raises the massive corporate governance issues in India’s Banking Sector. It is to be seen how the Government and the RBI respond to the banking crisis in India.

Author:
Dr. Amit Bhaskar, Associate Professor of Law, Unitedworld School of Law (UWSL)

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