Public Relations (PR) starts with a very crucial word- “Public”. Ironically, the banks in India are also called PSBs, either public or private sector banks. The rise and rise of Yes Bank and then the sudden black hole it created in terms of not just the public’s hard-earned money but also an investor and general public’s confidence into the entire banking system in general, and RBI in particular.
We all know how demonetization pushed most of us towards relying on banking systems and financial inclusion – somewhat readily but a lot unwillingly. While baby boomers saw things like emergency curtailing banking growth, Gen X saw our banking bandwagon barely teetering its way through incessant frauds, scams and subprime crisis of 2008. Since then, the financial giants like IL& FS and decade-old HFCs like DHFL have only fallen apart. One leading to another and causing an even bigger mess to clean in its wake.
United they fall, and the aftermath
As many as 44 companies belonging to 10 large business groups reportedly accounted for bad loans of Rs 34,000 crore of Yes Bank. Nine firms of Anil Ambani Group reportedly owed Rs 12,800 crore while Essel Group had unpaid loans of Rs 8,400 crore. Other companies on the list include DHFL Group, Dewan Housing Finance Corporation Ltd, Jet Airways (India) Ltd., Cox & Kings, and Bharat Infra.
Even though the CEA has assured that compared to the global average, Indian banks maintain 80% more money in honoring their liabilities towards the customers- the deposits, despite the stringent measures, regular auditing, and a hawk’s eye on NPAs by RBI, As the events unfold, investors are soon going to realize that Yes Bank has done nothing wrong, because re-routing your own money to settle a higher category NPA via a legitimate lending deal is not really a crime, and that’s what they did!
Toppling Investor Confidence
SBI at the behest of RBI is an unlikely savior for a private sector bank which was once considered to be the darling of Dalal Street punters.
On the day the crisis started unfolding, BSE Banking Sector Index was the top loser closing 1,146 points lower at 31,988 taking into account the hit YES Bank took after takeover from RBI. A clear indication of not just faith, but investor confidence in the banking system has also taken a massive blow, and it will be a while we recover from the same. While deposits in Yes Bank got eroded overnight, the day saw a D-street carnage the country hadn’t seen since 1942.
Would you blame an average Indian, who is feeling let down and is already planning to withdraw all his money and return it to unscrupulous private lenders, chit funds and Ponzi schemes, or a simple steel cupboard safe in his 1-room home?
The majority of Indians- barely earning a little over Rs 1 Lac per year ($1670) but had been convinced to “keep it safe” in a banking system and still grappling with the acronyms like PMJDY and everything now routed through banks are draining the ATMs dry, knocking at the doors of other banks and asking to be allowed to withdraw in hoards.
Fool me twice, thrice and many times more!
IL&FS, PNB, PMC, DHFL, and now YES, the list just got longer, with the majority of culprits going scot-free or at least enjoying their freedom- From Mallyas to Modis and now, Kapoors, everyone is engaged in pointing fingers while avoiding jail sentences. Yes, bank is a clear case of banking fraud, and RBI owes it to investors, bank customers, corporates as well as to not just come clean, but be a bit more transparent and forthcoming, and start the painful process of restoring the lost faith urgently.
Why RBI needs a sound Public Relations Strategy and how to go about it
Reserve Bank of India has, in the past taken up a lot of initiatives to restore public confidence in its ability to tide over crises. The Supreme Court and the RBI are the only two institutions in the country known to stand against the populist regimes and do what is right for the majority of democracy. If quick actions are not taken, the money will be following public faith and drain out of the banking system. An economy already reeling with high inflation liquidity crunch can not possibly suffer another blow in terms of investor confidence, because often, they are the last to return to roost after a crackdown. Like TRAI, RBI could also follow the Open house methodology to boost public confidence to clear all issues pertaining to banking.
Time to flex some PR muscles
The face of redemption:
For starters, RBI needs a more genial, public face that understands the worry of the common man as well as the nuances of labyrinthine banking laws. An open statement sharing the what, when, and why of the whole incident, followed by a step-by-step procedure to salvation will set the tone right and bring back some colour of hope into the drained faces.
Stronger regulations & checks:
Secondly, and most importantly- A mandatory surprise audit of all the banks, just like NBFCs are subjected to, is the order of the day. Any loan book that grows more than 15% YOY in a market that has been facing liquidity crunch needs to be scrutinized and dissected for tell-tale signs.
Whistleblowers and alarm bells are heard in time, and rewarded:
RBI should announce a reporting system where the smallest cog in the wheel of banks could have the right and access to reporting the minutest blip on the seismograph. Often, the small shocks are the warning signs and ignoring them often proves fatal, like this one. It is indeed hard to believe that the entire team at Yes Bank wasn’t aware of, or was not privy to what was going on. People don’t generally report if they fear they will have to face the heat.
Proactive and not reactive:
RBI must keep issuing public statements in the press and social media regularly, simplifying banking jargon, explaining the measures are taken and their immediate as well as far-reaching implications.
In today’s heavily connected world, news, especially bad news, is like a wildfire, and if the plan is to keep only your yard (banking & financial system) safe, it will not just be a PR disaster, but a potential threat to the economic growth of our country.
All the frauds and scams in past have shown how, a loophole in the system was ignored till the storm hit, and that is where RBI needs strong PR tactics that work to restore its relations with the public.