21 October, 2020

Counting On Hope, How Multiple Crises Have Failed To Break The Bank

Debacles like Yes Bank reveal its weak spots, but the banking system is neither broke nor broken. And it may get better.

Duty Under Lockdown
Banks keep their operations going with minimal staff
Photo by PTI
Counting On Hope, How Multiple Crises Have Failed To Break The Bank

On February 27, NABARD’s chief general manager K.S. Raghupathi wrote, “It is observed that despite the divergence being pointed out in the IRs (inspection reports)...and despite the accounts continuing to remain non-performing at the end of the next financial year, some bank/statutory auditors have not been ensuring proper classification of such assets while finalising the books of accounts as at the end of the next financial year.” This issue of circular divergence in NPA classification was elaborated just a week before the Yes Bank moratorium.

According to NABARD officials, they have become extra cautious since the Punjab and Maharashtra Cooperative Bank debacle. They don’t want a similar episode, and inspection teams are extra vigilant. “As the primary responsibility to contain frauds lies with the concerned bank, we issued a fraud vulnerability index (VINFRA) of banks on February 6,” says a senior official, adding that the 27-point index tries to capture policies and their implementation, control, systems and problem indicators, all...



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