Delhi HC seeks Centre, RBI & SEBI response on PIL to form a panel to probe Yes Bank transfer of stress assets portfolio
The Delhi High Court Friday sought response of the Centre, RBI, and SEBI on a petition filed by BJP leader Subramanian Swamy PIL seeking to form a committee of experts to investigate the transfer of a stress asset portfolio of Rs.48,000 crore from Yes Bank to JC Flowers Asset Reconstruction Company. In his PIL, the former MP sought to direct the Union Ministry of Finance, Reserve Bank of India, and Securities and Exchange Board of India (SEBI) to formulate comprehensive guidelines in accordance with recommendations of the committee to check any such future agreements/ transactions and to regulate the arrangements entered into between banks/ NBFS or other financial institutions and Assets Reconstructions Companies (ARC).
The bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad asked the authorities to file their responses within four weeks and listed the matter for further hearing on July 14. It also asked Yes Bank Ltd and JC Flowers Asset Reconstruction Pvt Ltd to place their responses. Swamy in his petition questioned how the NPA of Yes Bank worth Rs.48,000 crore was transferred to JC Flowers for sale and sought how RBI approved such a deal between the bank and the asset reconstruction company JC Flowers Ltd. Swamy was represented through senior advocate Rajshekhar Rao and lawyer Satya Sabharwal in the matter.
Swamy said through this petition he wishes to highlight the growing rot prevalent in the private banking sector, which has been further accelerated by the perpetual decay of corporate governance and ethical standards prevailing in the private banking industry and asset reconstruction industry. “This is a growing case of concern as there is an apparent conflict of interest between the functioning of banks and ARCs. The situation is further complicated, when motivated and mala fide transactions between the two are allowed to stand as the regulator (RBI), fails to act and enforce its own guidelines causing significant loss of public monies,” the plea said.
“This transfer is linked to another deal in which Respondent No.4 (Yes Bank) has obtained a stake of up to 19.9 percent in the company of Respondent No.5. (J C Flowers Asset Reconstruction Company),” it said. Submitting that Non-Performing Assets (NPAs) are a growing concern for private sector banks in India, Swamy said poor credit risk management practices and insufficient internal controls have contributed to the high levels of NPAs in private sector banks.
These types of deals not only undermine the trust of the public in the banking sector but also jeopardizes the economic stability of the country, said Swamy. He said that the transactions between the bank and the company seem to be an attempt to bypass RBI guidelines and harm the general public.
Yes Bank and JC Flowers had entered into an agreement for the sale of the bank’s NPAs in July 2022. The scam-hit Yes Bank with heavy NPAs and transferred stressed assets worth Rs.48,000 crore to JC Flowers under the 15:85 structure for Rs.11,183 crore. The petition said that this transfer is linked to another deal in which Yes Bank had obtained a stake of up to 19.9% in JC Flowers.
“This is a growing case of concern as there is an apparent conflict of interest between the functioning of banks & ARCs. The situation is further complicated when motivated and mala fide transactions between the two are allowed to stand as the regulator (RBI), fails to act & enforce its own guidelines causing significant loss of public monies,” said Subramanian Swamy in his petition seeking a probe on the Rs.48,000 crore deal between Yes Bank and JC Flowers Ltd in the sale of NPAs.
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