The Finance Minister on August this year had announced a series of measures to boost the economy and the financial market sentiments of the country. Among them was the setting up of a development bank. This comes during the time when there is an increasing call for sustainable development of the economy and the promotion of eco-friendly technologies. This announcement was in response to the economic slowdown and discouraging capital market sentiments. The idea for the establishment of a sound development bank is encouraging as it helps in providing investments on long-term projects that may have little or no profitable returns but are essential for the sustainable development of the country. This move allows for risky investments, the ones that are essential for addressing the environmental concerns, technological growth, and rural economic development.
On 5th March 2020, the Reserve Bank of India (RBI) had imposed a 30-day moratorium on the YES Bank, superseded the bank’s board and appointed Prashant Kumar, who was serving as chief financial officer and deputy managing director at the State Bank of India (SBI) as an administrator. Under the moratorium, deposit withdrawals were capped at Rs.50,000 per person. The apex bank had also proposed a reconstruction plan under which the SBI shall take a maximum of 49% stake in the restructured capital of the bank. The YES Bank crisis is not unique or unprecedented as it came due to the growing number of bad loans caused by the issues faced by the country’s economy, which ranges from real estate to power and NBFCs. Thus, ensuring necessary reforms in the governance, policies, etc., to safeguard the country’s financial sector are a need of the hour.