The Hindu Editorial Analysis
13 March 2020

1) Not a time to panic: On India’s response to coronavirus outbreak


  • CONTEXT:
  • With the virus galloping to 116 countries/regions causing more than 118,000 cases and 4,291 deaths, as on Wednesday, March 11, the World Health Organisation took the last logical step the same day to spotlight the threat posed by the novel coronavirus (SARS-CoV-2) — by declaring it a pandemic.

 

  • WHO ANNOUNCEMENT:
  • The announcement came as no surprise. On Monday, the WHO chief did caution that the “threat of a pandemic has become very real” based on the number of countries reporting new cases.
  • On Thursday, the numbers rose further: 1,27,863 cases and 4,718 deaths.
  • This announcement comes after WHO, on January 30, declared the outbreak a “public health emergency of international concern”.
  • Soon thereafter, it raised the global risk level to its highest — very high.
  • If the spread to more countries and the cases and deaths reported till the third week of February were of concern, it has become alarming since then.
  • On February 22, the WHO chief warned that the “window of opportunity for containing the virus is narrowing”.
  • Unfortunately, many countries did not take the warning seriously; in the last two weeks, the cases reported have increased 13-fold and countries reporting the virus have tripled.
  • Outside China, Italy (12,462), Iran (10,075) and South Korea (7,869) have the most cases.
  • Nearly 90% of cases reported globally are in just four countries and cases reported daily have seen a sharp drop in China and South Korea.
  • The response to WHO’s new classification should not be one of panic but must instead stir countries into changing the course of the pandemic.
  • While WHO had always asked all countries to take aggressive action in viral containment, it has now become all the more important to take that warning seriously.
  • All countries are required to trace, detect, test, isolate and treat cases to prevent a handful of cases from becoming clusters.
    • And for clusters from becoming widespread in the community and overwhelming the health-care system.

 

  • INDIA's CASE:
  • Even as India has done well in this by testing, isolating, contact tracing and treating people, it has so far restricted itself to people who have returned from abroad and those who have come in contact with infected people.

 

  • WAY FORWARD:
  • It may be prudent for India to adopt a more aggressive approach by looking for cases in the community to prevent the silent spread of the virus.
  • In addition, containment measures such as closing down schools and cancelling mass gatherings in enclosed places should be done wherever necessary.
  • Steps such as suspending tourist visas for nearly a month starting March 13 and quarantining Indians if needed are welcome — thermal screening cannot detect infected people who do not show symptoms yet.
  • India should pull out all the stops to cut the transmission chain as its fragile public health-care system will collapse if cases rise exponentially.
  • India must cut the transmission chain of the virus to save its health system from collapse.

 

2) Danger ahead: On India’s road safety record


  • CONTEXT:
  • Union Transport Minister Nitin Gadkari has expressed optimism that the significant amendments made to the Motor Vehicles Act have begun reducing the terrible death toll due to accidents on India’s roads.
  • As the prime mover of these changes, he finds the reported reduction in crashes, notably in Gujarat, Uttar Pradesh, Manipur, Jammu and Kashmir, Andhra Pradesh, Chhattisgarh and Maharashtra, proof of the law’s beneficial impact.

  • DATA's REFLECT DIFFERENT STORY:
  • Any reduction in road safety incidents in a rapidly motorising country is encouraging, but the cold reality is that data on those who lose their lives or are incapacitated do not reflect a marked decline.
  • In fact, they underscore the culture of indifference among States.
  • Unlike acute crises such as the COVID-19 pandemic, which has sent governments scrambling to save lives and stop economic derailment, a chronic malaise such as deadly road accidents begets only token measures.
  • What else could explain policymakers tolerating the loss of about 1.5 lakh lives each year since 2015, with the graph rising from 80,888 fatalities in 2001?
  • Small reductions in this infamous tally, which Mr. Gadkari took note of at a transporters’ summit, have little meaning, since they do not represent a trend of targeted reductions.

 

  • NEW MVA ACT:
  • The new Motor Vehicles law does have more muscle in being able to levy stringent penalties for road rule violations.
  • Some States are using it but that is not the same as saying that India has moved to a scientific road system marked by good engineering, sound enforcement, appropriate technology use and respect for all road users.
  • In fact, a World Bank ‘Delivering Road Safety in India’ report is apprehensive that rapid motorisation and more high-speed road infrastructure have raised the risks for road users.
  • The transition to a professional road environment requires implementation of first-tier reforms that deal with quality of road infrastructure, facilities for vulnerable users and zero-tolerance enforcement of rules by a trained, professional and empowered machinery.
  • A key mechanism of change are District Road Safety Committees, which were enabled even by the 1988 Act, but remain obscure.

 

  • WAY FORWARD:
  • A mandatory monthly public hearing of such committees involving local communities can highlight safety concerns.
    • And their follow-up action can then be supervised by the Members of Parliaments’ Road Safety Committees, created last year.
  • Here, it is essential to make the Collector, local body and police accountable.
  • District committees must hold open meetings to better India’s terrible record on road safety.
  • Making dashboard cameras mandatory, with the video evidence accepted in investigation, would protect rule-abiding motorists and aid enforcement.
  • To save lives on highways, quality trauma care at the district level holds the key.
  • In the absence of good hospitals and cashless free treatment, no significant improvement is possible in the quest to save life and limb.

 

3) Delhi’s shame is India’s shame


  • CONTEXT:
  • More than 100 days since protests against the CAA began, and weeks after the worst ever communal riots in Delhi since 1984, questions are being raised as to what went wrong.
  • It is quite evident by now that collective failure lay at the root of what could have been restricted in scope, if not entirely prevented.

  • THE MIX THAT IGNITED:
  • Some saw in the Delhi riots the shadow of 1984. The comparison is, however, flawed.
    • The 1984 Sikh riots took the authorities by surprise, while the country has been in a kind of ‘slow burn’ ever since the CAA was passed by Parliament in December 2019.
  • Over time, protests against the CAA became larger in scope, specially in urban centres such as Delhi, Mumbai, Chennai and Bengaluru, but no attempt was made on the part of the authorities to defuse the situation.
  • A mixture of:
    • political insensitivity,
    • deliberate apathy in allowing the situation to simmer,
    • social disharmony,
    • pronounced incompetence of those responsible for law and order, and, above all, a highly polarised atmosphere,
    • helped stoke the embers of conflict.

 

  • STATEMENT BY JUDGES:
  • The statement of Supreme Court judge, K.M. Joseph, that timely action by the Delhi police could have saved lives, set-off a flurry of accusations by others against other organs of the state as well.
  • Even the Delhi High Court and the Supreme Court came in for a share of blame, albeit for not intervening effectively to contain the violence.
  • One former Justice of the Supreme Court argued that had the judiciary been more proactive, lives lost in the recent violence could have been saved.
  • The Chief Justice of India, Sharad Bobde, opined that courts were not ‘equipped’ to handle palpable ‘pressure’ being created to somehow step in and prevent violence.

​​​​​​​

  • THE POLITICS:
  • Sections of the political class seemed to revel in the unsavoury scenes witnessed during the riots.
  • Some leading members of the ruling party, including at least one Member of Parliament and a Central Minister, also engaged in verbal pyrotechnics.
  • Opposition leaders were no less irresponsible. Provocations from both sides of the political divide thus largely fanned the violence.
  • The Central government demonstrated an obvious unwillingness to step in to quell the violence, despite the fact that law and order in Delhi is primarily the responsibility of the Home Ministry.
  • The Home Minister is reported to have kept himself abreast of the situation in northeast Delhi, but seemed to have done little else.
  • Political analysts have speculated that this may be due to the Bharatiya Janata Party’s angst, consequent on the rebuff it received in the recent Delhi elections.
  • Union Home Ministry seems to have endorsed the muscular law and order tactics adopted by the Delhi police once the riots broke out.

 

  • AAP:
  • What is surprising and unfortunate is that the AAP government, which had been elected on a promise of restoration of social harmony, and had sought to distinguish itself from the policies followed by the BJP government.
  • They sat out the conflict, at a time when social harmony was at high risk, and sizeable segments of the population in northeast Delhi were facing extraordinary high levels of risk to their lives and livelihoods.
  • The Chief Minister’s failure to apply the necessary balm to try and contain the situation has certainly stained his image.

 

  • LAW AND ORDER:
  • In security and law and order parlance, intelligence and police constitute the vital last 10%.
  • Compounding the failure of the political and administrative leadership has been the ineptness displayed by the police and intelligence agencies.
  • No agency could have missed the steady build-up — not only of tensions but also of actual preparations for violence — well before the incidents of February 23 and subsequent days (which took a toll of over 50 lives).
  • A mixture of police overreaction (within the precincts of Jamia Millia University) and of police inaction in Jawaharlal Nehru University had already sounded the bugle for what lay ahead.
  • The Delhi police would also, no doubt, have known that the ‘peaceful demonstration’ in Shaheen Bagh was an aberration of sorts, and that they should be prepared for violence once protests spread to other areas.

 

  • A LAPSE:
  • Arguments adduced subsequently that nearly 7,600 members of the Central Forces — Delhi has about 80,000 police officers and men — were deployed to contain the riots, cannot obscure the extent of failure.
  • Preparations for violence and the polarising rhetoric had made it all too evident that violence could be expected. Provocation was there in plenty from both sides.
  • What was unpardonable, however, was that prominent leaders belonging to the ruling dispensation were allowed a free rein by the authorities to vent their ‘bilious views’ in public, which were heavily laced with communal overtones.
  • Blaming the police is par for the course whenever a major riot occurs.
  • Sometimes the police are taken unawares, but this time the police had ample warning, from their own accumulation of day-to-day information and presumably from central intelligence agencies as well.
  • What then explains police ineptness on this occasion?
  • The Delhi police does function under a kind of diarchy, controlled not by the Chief Minister, but by bureaucrats in the Union Home Ministry, who operate through the Lt. Governor.
  • In effect, no one remains in control. Yet, even this does not quite explain why the Delhi police failed to see what was coming.
  • The most widely held view is of political interference with actions being dictated by political considerations. If this indeed is the case, it seems to have been a very high a price to pay.
  • Even then, the Delhi police needs to provide a true explanation for their utter ineptitude.

 

  • TARGET FOR ALL:
  • The riots in Delhi did not fall into the category of nuclear science.
  • If it were the latter, one could at least have attributed this to intelligence failure. The steady build-up of tension was all too obvious.
  • Areas that needed to be properly screened for the presence of agent provocateurs and trouble-makers ever ready to exploit such situations were known.
  • Even a far less endowed police force, would have been able to effectively handle a situation that has since become a symbol of shame for Indian democracy.
  • It invited the wrath of not only bodies such as the Office of the United Nations High Commissioner for Human Rights, but also allowing countries with little pretence to secular democracy to point fingers at us.
  • This is hardly a place to discuss modern policing techniques.
  • It is inconceivable, however, that the Delhi police would not have carried out proper data mapping, so critical for efficient law and order management, one which all modern police forces adopt.
  • This is the fundamental basis of all intelligence-led policing today. It is difficult to believe otherwise.
  • Admittedly, however, to use an age-old idiom, there are many ways to skin a cat and, possibly in this instance, the Delhi police were perhaps directed by their political superiors to adopt another tack.
  • Delhi’s shame is India’s shame. Trouble-makers taking advantage of this lapse may feel encouraged to try and repeat the same in the future.

 

  • WAY FORWARD:
  • The Delhi police need to set their house in order for, alongside other police forces across the world, they need to prepare for a future in which technological advances are creating an entire new paradigm of threats.
  • In the age of rampant social media, they need to be ready to deal with the ‘weaponisation of social media’ — this may have already occurred in the Delhi case.
  • In the era of artificial intelligence, they will also need to prepare for the so-called ‘deception revolution’
    • Including dealing with ‘deep-fake’ threats, where digitally manipulated audio and video material designed to be as realistic as possible, becomes near impossible to separate from the truth.
  • This would create a whole new portfolio of dangers.

 

  • CONCLUSION:
  • As we face untold new dangers, it would be unfortunate that through a combination of factors, including unwarranted interference in its role and activities, India’s law and order showpiece, the Delhi police, is portrayed as inefficient and ineffective, even to deal with a mundane communal riot.

 

4) Parley | Should distressed private banks be saved by PSBs?


  • CONTEXT:
  • A day after the government imposed a moratorium on the financially troubled Yes Bank last week, the Reserve Bank of India announced a draft restructuring plan that entails the State Bank of India acquiring a 49% stake in the private lender.

​​​​​​​

  • Is a bailout of a failing private lender by a public sector bank justified? And if so, on what grounds?
  • T.T. Ram Mohan:
  • It’s not the best option certainly. I think the first option should always be to have a private investor come in and infuse his capital into the private bank.
  • The RBI did give some time to the Yes Bank management to work out such an arrangement but evidently that did not succeed.
  • The next option then, the straightforward option, would have been for the government to simply nationalise Yes Bank.
  • And as you know, that’s exactly what happened during the global financial crisis with innumerable private banks all over the world.
  • But here the government is facing severe fiscal constraints. And also, it is finding it very difficult to infuse money into its own public sector banks.
  • That perhaps explains the reluctance of the government to nationalise Yes Bank.
  • So, what we have is really something that should be the very last resort, which is getting a public sector institution, a public sector bank, SBI, to lead the rescue.

 

  • Why is it that in the case of a private lender, unlike, say, an airline, there’s a reluctance on the part of authorities to let the bank fail?
  • Ananth Narayan:
  • It’s never pleasant or elegant to see something like this… intervention by the government. But let’s face it, this is an issue of financial stability. Yes Bank was not a small bank.
  • The total balance sheet size was close to ₹3.5 lakh crore, lots of depositors, lots of businesses.
  • And one thing which the Financial Stability Report of the RBI does kind of enumerate is the level of inter-connectedness within the financial services ecosystem.
  • While after the global financial crisis, the idea was always to have no bank which is too big to fail, the reality is the inter-connectedness between banks themselves, banks and the rest of the financial sector ecosystem, including mutual funds, insurance companies, non-banking finance companies (NBFCs), etc.
  • And then the inter-connectedness of the financial sector with the real economy is so deep, that you know, what is good in theory would rarely be good in practice.
  • So, I don’t dispute that what the government has done, which is stepping in to try and resolve the Yes Bank crisis, is the right approach.
  • We can argue about what could have been the best approach.
  • In the past, banks such as Global Trust Bank have been subsumed within existing banks, rather than trying a half-way measure as we are doing right now.
  • So we can argue about the right way of doing this and the right modalities of doing this. But some kind of intervention was definitely required.
  • I will only also add, this isn’t over. While Yes Bank was an immediate problem, which obviously had to be resolved and I’m sure will be resolved, the larger trust deficit in the financial services ecosystem remains.
  • And much work needs to be done beyond this.

 

  • Despite the availability of key check posts including Basel III norms, Asset Quality Review (AQR) and metrics to decide whether or not to put a lender into the PCA framework, we find ourselves at the current pass. Is there evidence of regulatory laxity or failure?
  • T.T. Ram Mohan:
  • Whenever you have a failure like this, there is a presumption that the regulator has not been up to the job.
  • This is something that will have to be looked into. I think the Finance Minister has already asked the RBI to fix accountability for whatever has happened.
  • But it’s not clear to me in what way the regulator can be said to have failed in this particular case.
  • Because they did move in to oust the founder from the bank, sometime in 2018. So that step was taken. Whether any step could have been taken prior to that, I think it’s a matter of guesswork.
  • But what I will say is that the conditions in the financial sector deteriorated significantly post September 2018, when we had the collapse of IL&FS, which is a non bank.
  • And my own view is that that was a serious lapse on the part of the government not stepping in to rescue IL&FS.
  • Because the shocks arising from the failure of IL&FS, the erosion of confidence, and the flight of funds from the NBFC sector, all that we are still sort of experiencing.
  • So, in some sense, it’s not a regulatory failure, or if there’s a regulatory failure, it’s the failure of the RBI to persuade the government to step in, in the case of IL&FS.

 

  • Are larger public sector banks, including SBI, being made more fragile by involving them in bailouts of their public sector or private peers?
  • Ananth Narayan:
  • It’s never good for a bank to have to step in and practically as a last resort have to rescue another bank.
  • I’m sure given the choice, the SBI management would have probably rather not gotten themselves involved in a Yes Bank rescue.
  • But as the chairman and managing director of SBI himself said, when the country’s interests come to the forefront, people have very little choice.
  • Things are a little fragile for the overall financial services ecosystem. As per the Financial Stability Report, public sector banks have 12.7% of gross non-performing assets (NPAs) as of September 2019.
  • That number could actually be higher if you were to include or remove the kind of forbearance available on some sectors like small and medium-sized enterprises [SMEs] and real estate.
  • Plus, as of September, loans to NBFCs such as DHFL [Dewan Housing Finance Corporation] were actually counted as current.
  • So, accounting for all of that, that number is probably higher, and it’s higher than the rest of the ecosystem.
  • Plus, over the last few years, the government has had to infuse ₹3.5 lakh crore of equity into public sector banks.
  • So, the overall banking system is kind of fragile at this point in time, and it’s clearly burdened with things like NPAs and loans.
  • I wouldn’t call this particular Yes Bank episode a question as to whether public sector banks are better governed or private sector banks are.
  • I think the reality is that every element of the financial services ecosystem requires governance reforms.
  • Governance is a cross bank and cross institutional issue. It’s not limited to public sector banks or private sector banks or NBFCs; it’s across the board.

​​​​​​​

  • Is there a need for some of these metrics [related to the PCA framework] to be recast or reappraised?
  • T.T. Ram Mohan:
  • The criticism, up to this point, has been that the PCA framework is far too stringent.
  • And as you know, there’s been tremendous pressure on the RBI to get the banks which were under PCA, public sector banks and I think one or two private banks, to get some of the public sector banks out of the framework.
  • Now, if people are arguing the framework is not stringent enough, then that’s an altogether new point that they’re making.
  • In the case of Yes Bank, it did not qualify for inclusion under PCA using the metrics which are applicable and now what people are saying is that the RBI should have looked at something like the rate of growth of assets or the rate of growth of the loan book.
  • And that when there is this kind of aggressive growth, the regulator should be watching very closely.
  • Now that is strictly hindsight.
    • Because part of the reason for a very rapid growth in the loan book of private banks is that the public sector banks have been fairly comatose, there has not been much lending as corporate lending, at least in the last few years, growth has been very tepid.
  • And that space has been taken up by private banks.
  • And the second thing is that a bank like Yes Bank starting off on a low base, high rate of growth would not be an issue.
  • Now, after the event, if we were saying that they were growing at 30-35%, and the regulators should have done something about it, and that the PCA framework should accommodate something like that.
  • Well, I think it’s a bit of a stretch. I would say that matters such as this would fall within the domain of the risk management committee of the board of the bank.

 

  • The RBI’s proposal includes a write-off of AT1 (Additional Tier 1)bonds, a move that has prompted an immediate legal challenge. How risky is this whole exercise going to be for the entire financial system?
  • Ananth Narayan:
  • From what I can see of the RBI circulars, Basel III regulations, as well as the information memorandum relating to these particular AT1 bonds, I think what the RBI has proposed is perfectly legally valid.
  • I understand it’s being challenged in a court of law and you will probably know the result soon enough, but it does seem absolutely within the letter and spirit of the law, whatever has been proposed by the RBI.
  • In fact, one of the information memorandum that I saw for a particular AT1 bond of Yes Bank, specifically says that if Section 45 of the Banking Regulation Act is invoked by the RBI, the bond will necessarily see a full write-down, a permanent write-down of 100%.
  • So, given those kind of conditions, I’m really not sure if bondholders can really contest this.
  • I’ll tell you something, which still is kind of a question mark; any person studying corporate finance is taught that equity is the riskiest instrument, and that subsequent instruments are senior to equity in terms of the risk hierarchy.
  • Having a situation where equity holders are still salvaging something... at a time when AT1bonds are being written down completely is quirky and is something which raises questions.
  • So, at the very least, the people who are subscribing to these AT1 bonds the way they’ve been defined and designed, should have been questioning as to whether these are really senior to equity in terms of risk and should be probably questioned even now as to why those investments really happened.
  • To your broader question on what the ramifications will be:
    • Look, there’s no question that AT1 investments going forward will be repriced, which means that investors will take a lot more of a hard look at those papers before putting their money into it.
  • In a way, that’s not bad news at all. Frankly, AT1 markets in India were probably being mispriced.
  • There were also instances of mis-selling by some bank relationship managers of AT1 papers to high-net-worth or even middle-net-worth kind of individuals, which is gross mis-selling, in my view.
  • So, while it will be difficult for banks to raise money from AT1 going forward, it’s not a bad outcome in entirety.
  • I think it will be better risk managed, better risk priced, better designed, and there’ll be more checks and balances to ensure that mis-selling doesn’t happen.
  • One last bit. I’m glad that at least so far, the tier-two bonds and the infrastructure bonds and other senior secured bonds of Yes Bank are not being touched.
  • We don’t know what the final solution will look like.
  • But at the current situation, while we can question as to whether that’s the right outcome for the specific case of Yes Bank, I think it’s the right outcome for the ecosystem as a whole.
  • The last thing you wanted was a broader question mark about the applicability of other senior secured instruments as well, beyond the AT1.

 

  • Are we creating a larger number of banks that potentially become ‘Too Big to Fail’ ? The RBI had earlier identified only SBI, ICICI and HDFC Bank as Domestic-Systemically Important Banks.
  • T.T. Ram Mohan:
  • The systemically important banks are banks which are tracked more carefully and which are also subject to higher capital requirements under Basel III.
  • But that is not to say that banks which are relatively smaller in size, such as Yes Bank, do not pose systemic risk and therefore, should not be rescued.
  • In practice, the threshold for a bank to be considered large enough to constitute a risk to the system is much lower.
  • So characterising a bank as systemically important has more to do with tracking particular banks more carefully.
  • That does not mean that there is no case for a rescue with banks of a much lower size.
  • Even a bank with a size of about ₹2,00,000 crore, if it were to fail today, would need to be rescued. And that way it does constitute a systemic risk.

 

  • Are there wider risks to banking stability given the underlying stress among corporate borrowers in a wide range of sectors from telecom to power to aviation?
  • Ananth Narayan:
  • This is a risk that a lot of us have been flagging for a while now, that there is a trust deficit in the financial services ecosystem which is linked to several stresses on corporate and SME balance sheets at this point in time.
  • As per the Financial Stability Report of the RBI, as of September, the gross NPAs of the banking system was 9.3% of advances.
  • And there are analysts who say that if you include the forbearance available to SMEs and to some real estate assets, besides the fact that some NBFCs were not classified as non-performing in September, even though they subsequently have [become] non-performing like DHFL, the actual number could be higher than 9.3%.
  • The problem really is for NBFCs where the official number for gross NPAs, as of September, was 6.3% of advances. That number doesn’t make sense. NBFCs typically lend to sectors which are riskier than banks.
  • And it does feel like the real number could be much, much higher and mind you, no asset quality review has happened for NBFCs as yet.
  • Now, the whole edifice of a financial services ecosystem is trust — if people don’t trust the numbers, which are being put out for the asset quality, clearly that has implications for financing, that has implications for the ability and the willingness of people to actually lend and put out money. And this is something which has to be addressed.
  • Eventually to restore trust, I think we have no choice but to actually make a clean breast of where we are in terms of the true asset quality.
  • Which is, where all the ramifications of the stressed sectors including real estate, construction, power, telecom, airline and shipping, maybe even several public sector enterprise loans, will come to the fore.
  • So, alongside that disclosure, if you don’t want the system to actually go through a lot of strain, you obviously require a solution as well.
  • Now, while we have a very good Insolvency and Bankruptcy Code and the NCLT [National Company Law Tribunal] process, I don’t think it’s geared to handle the overhang of stock that we have right now of NPAs.
  • We already have more than 2,000 cases pending at the NCLT courts. So we probably require a one-time solution as well to go along with this actual disclosure of the real state of affairs.
  • Absent these two things, and of course, the larger reforms… it is possible that this overall financial services ecosystem remains in a bit of a comatose condition for a long time and that’s terrible news for us.
  • We need our financial system to be able to fund growth; at the moment, that’s not the case at all.

 

  • How confident are you about the outlook for the financial system?
  • T.T. Ram Mohan:
  • I agree the conditions are very challenging, and not just the adverse global conditions.
  • At the moment the stresses within our own financial system have got considerably exacerbated consequent to the Yes Bank episode.
  • We have to see what happens to the attempted rescue. The details of the rescue plan are evolving, even as we speak. It’s not clear what the precise rescue plan is going to be.
  • And so we have to wait and watch and see whether any attempted rescue of Yes Bank has a reasonable chance of success. That is a crucial factor.
  • But irrespective of how that problem is resolved, the damage to confidence caused by the moratorium, one month moratorium, and the cap on withdrawal of deposits of ₹50,000 cannot be overstated.
  • And I think that is duly reflected in the hammering that several private bank stocks have received over the last few days.
  • It’s also not helpful that the Maharashtra government has made it very clear that none of the State government’s accounts or the accounts of the civic and other bodies under the State government will be left lying with private banks hereafter.
  • Now, I shudder to think of what the implications would be if other State governments were to imitate the State government of Maharashtra, which is highly likely.
  • So we need some cool heads at this point and there has to be coordination between the Central government, the State governments and the RBI to bring about some calm in the sector.
  • The rescue plan for Yes Bank is a starting point. But there are various other things that need to be done.
  • And let me say that the impending bailout package for telecom is one of the many imponderables in the scenario.
  • But my guess is that whatever plan is announced is going to prove quite stressful for the banking sector.