The Reserve Bank of India’s (RBI’s) actions in punishing Axis Bank and Yes Bank, for under-reporting non-performing assets (NPAs), signals that it wants to get tough. Unfortunately, it is not in a position to do this in the same way with public sector banks where the rot in terms of under-reported NPAs is probably a lot worse.
The market response to the news was also interesting and perhaps, a little puzzling. In both cases, the central bank curtailed the tenure of the respective CEOs. That led to a massive fall in share prices. Was that a rational market response? Arguably, if
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