According to the Reserve Bank of India (RBI) on Friday, the State Bank of India (SBI) is willing to invest in the crisis-riden country’s fourth-largest private sector lender Yes Bank with a “reconstruction” scheme.
Yes Bank crisis Updates
The RBI announced via the draft ‘Yes Bank Ltd. Reconstruction Scheme, 2020′ which reads that 49 percent stake of Yes Bank will need to be picked up by a strategic investor bank which cannot be reduced below 26 percent before three years from the date of capital infusion.
Through a release, the RBI announced that the authorized capital of Yes Bank would stand altered to Rs 5,000 crore and the number of equity shares to 2,400 crores having face value of Rs 2 each. The investor bank shall agree to invest in the equity of the Reconstructed bank to the extent that post-infusion, it holds 49 percent shareholding in the Reconstructed bank at a price not less than Rs 10 (Face value of Rs 2 and a premium of Rs 8).
Under the scheme, the bank’s employees will continue their service with the same remuneration and on the same terms, as before, at least for a period of one year. However, the board will have the flexibility to discontinue the service of key managerial persons at any point. There will be no change in the offices or branch network as well. The RBI has placed the draft scheme on its website for public comments up to March 9.
There will be no change in any conditions related to a home loan, personal loan or car loan or credit card dues of customers. They will have to continue making EMI payments as per existing terms. Also, all depositors can expect interest to grow on their deposits as per current interest rates. All schemes, contracts, deeds, bonds, agreements, powers of attorney, grants of legal representation and other instruments shall be effective to the extent and in the same manner. This means all legal contracts related to Yes Bank won’t be affected by the ongoing crisis.
The temporary inconvenience of the withdrawal cap of Rs 50,000 per customer during the moratorium period (up to April 3) may also be over soon. The ailing bank’s newly-appointed administrator Prashant Kumar, too, said it’s taking “necessary steps to ensure seamless transactions” and urged depositors not to panic.
Meanwhile, Finance minister Nirmala Sitharaman has assured YES Bank customers that each depositor’s money is safe and said that she has asked the RBI to undertake a comprehensive probe on what exactly went wrong at Yes Bank and fix individual responsibility.
Sitharaman said, “We are ensuring customers’ interest is protected. We can assure all depositors that their money is safe… I am closely monitoring every institution which requires that kind of monitoring along with RBI.”
The minister also stated that the central bank noticed in 2017 governance issues, weak regulatory compliance, wrong asset classification and risky credit decisions at Yes Bank. A new CEO (Ravneet Gill) was appointed in September 2018 and the cleaning up of the bank was initiated. The new restructuring scheme will be fully effective within the moratorium period of 30 days (April 3).
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