State Bank of India's outgoing Chairman, Rajnish Kumar, the man credited with overseeing the rescue mission for Yes Bank, opened up about the conditions under which the troubled lender was saved.

By the time Reserve Bank of India had put Yes Bank under moratorium in early March and limited withdrawals from the bank, conversations had begun about how the bank would be saved. In the end, it took eight financial institutions led by State Bank of India and Rs 10,000 crores of combined capital infusion, to resuscitate Yes Bank.

“As chairman you are supposed to take many decisions and all decision making is a collective decision making. Yes Bank definitely – the stage at which SBI stepped in, it was in ICU counting its last breath," Kumar said.

"Luckily for everyone, for the country, for the country’s financial system and for SBI, everything has turned out to be alright. 2-3 crucial decisions at that time were, one, we would not like it to be subsidiary of SBI and two, we would not like it to be merged with SBI. To that extent there was an understanding – RBI and the government both understood that point of view," Kumar said.

SBI's third condition was that the bank should not be the only one participating in the rescue act.

"If it is a question of financial stability then other players also should make contribution but we were ready to lead the process and that is what exactly happened," Kumar said.

"One more learning is that whenever there is a situation like this, you cannot go not fully prepared. For any bank rescue, two things are very important – one is capital and the second is liquidity. These two coupled with the quality of the board and the management, once you put these four together only then you can win this battle,” he said.

At that time, speculation was rife that Yes Bank would have to merge with a bank like SBI , and even after the reconstruction of the bank was completed, talks about a merger with SBI kept doing the rounds. Putting to rest any such theories, the SBI boss said that merging Yes Bank with SBI would just not have been possible because of the cultural gulf between the two banks.

"Merging of Yes Bank with SBI was not possible. Merging the balance sheet of Yes Bank for SBI is a child’s play. However when we talk about the culture – where do the mergers fail? They fail on the culture issue.

What is the compensation structure in Yes Bank and what is the compensation structure in SBI? What is the work culture in Yes Bank and what is the work culture in SBI? We are poles apart. So the biggest problem if you look at any merger for example Air India with Indian Airlines, IDBI Bank with IDBI, why they did not succeed? Why these mergers are in a mess? It is because of cultural issues.

SBI absorbing Rs 2.5 lakh balance sheet of Yes Bank was not difficult but when we talk about merger, we have to talk about the merger of the people. We would have landed into a big mess if we had attempted the merger," Kumar said.

He said that Yes Bank's turnaround is a case study, and at that time, few had expected Yes Bank to be around after six months.

"So definitely certain right calls were taken and that has helped in not only survival of Yes Bank but also the stability of the banking system in India,” he said.

While the restrictions on Yes Bank have since been lifted, withdrawal caps removed, a new board appointed, Rs 15,000 crore raised via an FPO, and Rs 50,000 crores of liquidity facility loaned from RBI returned, concerns about a full recovery remain.

Rajnish Kumar added that to resolve cases like Yes Bank, what is really needed is a dedicated resolution corporation or an institution specifically tasked with such a purpose.

"...we need somebody like a resolution corporation. So why ask SBI or any bank, we should have corporation which should be doing this thing. So there is a need for dedicated resolution corporation or entity who can do the same things which we have done,” he said.

First Published:Oct 6, 2020 7:31 PM IST