RBI caps withdrawals from Yes Bank at Rs 50,000

The Reserve Bank imposed a moratorium on the capital-starved Yes Bank and capped withdrawals at Rs 50,000 per account till further orders. The board of Yes Bank has also been superseded with immediate effect.

Mumbai:Troubled private sector lender Yes Bank was placed under a "moratorium" on late Thursday, with the RBI capping depositor withdrawals at Rs 50,000 per account for a month and superseding the board with immediate effect.

The Reserve Bank of India (RBI) took the decision in consultation with the government to protect depositors' interest.

The Reserve Bank of India assured Yes Bank depositors that their interest will be fully protected and that there is no need to panic.

The RBI also superseded the board of Yes Bank, which has not been able to raise required capital for the last six months. It also appointed former Chief Financial Officer of SBI, Prashant Kumar as the administrator of Yes Bank.

"The Reserve Bank came to the conclusion that in the absence of a credible revival plan, and in public interest and the interest of the bank's depositors, it had no alternative but to apply to the central government for imposing a moratorium under Section 45 of the Banking Regulation Act, 1949," the RBI said in a statement late in the evening.

The statement said the bank management had indicated that it was in talks with various investors and they were likely to be successful. The bank was also engaged with a few private equity firms for exploring opportunities to infuse capital.

"These investors did hold discussions with senior officials of the Reserve Bank but for various reasons eventually did not infuse any capital.

"Since a bank and market-led revival is a preferred option over a regulatory restructuring, the Reserve Bank made all efforts to facilitate such a process and gave adequate opportunity to the bank's management to draw up a credible revival plan, which did not materialise," the statement said.

In the meantime, the bank was facing regular outflow of liquidity, the apex bank said, justifying its actions.

K Srinivasa Rao, Ex- Director NIBSCOM speaking to ETV Bharat said "Yes Bank is a shock to the banking industry. RBI should have restrained in taking such drastic step. It's collateral damage is irreperable."

The latest development comes six months after the regulator did the same with the city-based cooperative lender PMC Bank after a large scam was unearthed.

Yes Bank has been grappling with mounting bad loans.

Earlier in the day, sources said SBI along with some other financial institutions would bail out Yes Bank, with the government giving the go-ahead.

As speculation over a takeover of Yes Bank grows, a research report by Macquarie Capitalalso pointed out that State Bank of India and other public sector banks need not pay more than Re 1 for Yes Bank share.

Macquarie pointed out that Yes Bank's net worth is zero and that there is lack a of clarity on the bank's deposit franchise due to the solvency issues.

"YES Bank has a net-worth of around Rs 25,000 crore. Its below investment grade book (BB&Below) is around Rs 30,000 crore and BBB book is at around Rs 50,000 crore. If we assume substantial proportion of BB & below book is wiped off and say 10-15 per cent of BBB book is to be written off, it implies the current net worth of the bank is zero (after factoring in 25 per cent tax benefits). Ideally and theoretically speaking, SBI and other PSU banks need to buy the bank at Re 1," Macquarie said in the report.

If the plan is implemented, it would be the first major instance in many years where a private sector lender would be bailed out using public money.

In 2004, Global Trust Bank was amalgamated with Oriental Bank of Commerce and in 2006, IDBI Bank took over United Western Bank.

The curbs on Yes Bank come after similar action was taken against fraud-hit cooperative lender PMC Bank in September, where depositors are still in the lurch.

(PTI and IANS Report)