JUNE 3 — I read with interest Federation of Malaysian Business Association’s letter ‘Moratorium for MCO 3.0 and post-pandemic period: Time for banks to bite the bullet’.
The assertion that the “Malaysian government bailed out the financial systems (banks included) to the tune of RM70 billion, just over 10 per cent of our GDP in 2008/9” with the main beneficiaries being “the banking system who were saddled with a high credit exposure and facing an imminent collapse” is news to an uninitiated layman like me.
Moratorium has benefited the banks. Take the example of the Reserve Bank of India (RBI) moratorium on the capital-starved Yes Bank — India’s fourth largest private bank — in March last year.
Yes Bank had been grappling with mounting bad loans. The RBI on March 5 imposed a moratorium by capping withdrawals at Rs50,000 per account till further orders to check panic cash outflow. The board of Yes Bank was also superseded with immediate effect.
The RBI assured the depositors of the bank that their interest would be fully protected and there was no need to panic. In its statement, the central bank said the move was necessary to quickly restore depositors’ confidence in the bank after its inability to address potential loan losses and resultant downgrades.
“The bank has also experienced serious governance issues and practices in the recent years which have led to steady decline of the bank,” the RBI statement said.
The moratorium helped.
Four days after the moratorium, Yes Bank’s new administrator Prashant Kumar said that only one-third of the customers had withdrawn Rs50,000 during the period, and in the last four days the bank had more inflows than outflows. The moratorium was able to curb banking operations, only one-third of the customers withdrew from the bank, and therefore brought more money to the bank.
This allowed the central bank to lift the moratorium two weeks ahead of the moratorium period. With that, the withdrawal limit on the accounts was lifted and normal banking operations resumed.
So Yes Bank got back its “Yes” from investors as its shares closed at Rs60.80 apiece, gaining 3.67 per cent from the previous close on BSE (previously known as Bombay Stock Exchange). The bank’s shares had nosedived to Rs5.55 apiece and touched a 52-week low after the central bank imposed the moratorium.
And so a bank was saved — by a moratorium.
Is it too much that the banking industry “take a moral stand and step up when the country is in a crisis”?
And give a moratorium to not only those in the B40 but also those in the M40 and all business types — the small, mid-tier and larger entities?
Without being “forced” to. Time for the country to bank on banks.
*This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
