New Delhi, March 06: In a rare move, capital-starved Yes Bank was on Friday placed under a moratorium, with the RBI capping deposit withdrawals at Rs 50,000 per account for a month and superseding its board. With this, the Yes Bank now will not be able to grant or renew any loan or advance, make any investment, incur any liability or agree to disburse any payment.
The regulatory actions, undertaken by the RBI and the government, came hours after finance ministry sources confirmed that SBI was directed to bail out the troubled lender. For the next month, Yes Bank will led by the RBI-appointed administrator Prashant Kumar, an ex-chief financial officer of SBI.
The country's financial sector is already reeling under a spate of setbacks, starting with the high quantum of dud assets at over Rs 10 lakh crore, their slow-paced resolutions despite legal teeth through bankruptcy laws, scandals at non-bank lenders like IL&FS and DHFL, and also fraud at cooperative lender PMC Bank.
The last lender to be placed under a similar action was PMC Bank in September last year. While the withdrawal limits have been increased over time to Rs 1 lakh now, many PMC Bank depositors are still in the lurch. There is no provision to handle insolvencies of commercial banks, and the raft of actions come even as the government is working on the FRDI (financial resolution and deposit insurance) Bill.
Just like PMC and DHFL, the RBI has superseded the board of Yes Bank for a period of 30 days owing to serious deterioration in the financial position of the bank. The government took the decision of placing the bank under moratorium on an application made by the RBI, a gazette notification signed by Amit Agarwal, joint secretary in the finance ministry.
Yes Bank's core equity tier-I ratio had slipped to 8.7 per cent as of September. The bank had pushed its December quarter results announcement to March 14, citing hindrances it may pose to the capital raising plan. "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," an RBI statement said late Thursday evening.
It said the bank management had indicated that it was in talks with various investors and 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 central bank noted.