Posted in India
March 6, 2020

Yes Bank: RBI takes control, caps withdrawal limit

Yes Bank shares plummeted one day after the Reserve Bank of India (RBI) suspended the board of private-sector lenders for a period of 30 days “because of a significant deterioration in the bank’s financial position” and placed a Rs 50,000 withdrawal cap on its account holders with few exceptions until April 3. Yes Bank shares crashed at Rs 5.65 to trade 85 percent of their value. The stock was closed on Thursday at Rs 36.80.

RBI said a “moratorium” was imposed on Yes Bank on Thursday stressing that the bank’s financial potential has been gradually declining due in large part to the bank’s inability to raise capital.

“We are going to take swift action… And we’ve got a scheme in place to revive Yes Bank,” said RBI Governor Shaktikanta Das. The decision on Yes Bank was taken at a “larger level” and not at the level of the individual entity, and was intended to ensure the stability of the financial system, RBI governor further said. “RBI is ready to intervene in whatever way it takes to respond to epidemic challenges,” the RBI governor also assured.

The government has limited the withdrawal of deposits to Rs 50,000 and any withdrawals over and above that amount would require the Reserve Bank of India’s permission.

Moody’s said the moratorium was credit negative as it impacted depositors and creditors ‘ timely repayment and added that the lack of coordinated action highlighted continued confusion regarding bank settlements in India.

Yes Bank has struggled to raise capital that it needs to stay above regulatory requirements as it fights high levels of bad loans The Nifty Bank index-comprising shares in 12 of the country’s major lenders like SBI and Yes Bank-plunged 4.5 percent to 27,491. The BSE Sensex had fallen 1,215 or 3.1 percent to 37,262 and NSE Nifty had sunk 373 or 3.3 percent to 10,900 points.

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