Yes Bank Withdrawals Capped At Rs 50,000, RBI Takes Over Board, YES Bank’s online banking disrupted; Who can be exempted
The city-headquartered Yes Bank, once the darling of investors, has been facing difficulties ever since new chief executive Ravneet Gill took charge last March and revealed massive stress in the loan book.
Yes Bank customers will be able to withdraw only Rs 50,000 from their accounts till further orders by the Reserve Bank of India. The central bank has imposed a moratorium on capital-starved Yes Bank.
RBI, in a notification, has said, that the financial position of Yes Bank has undergone a steady decline due to the inability to raise capital to address potential loan losses and resultant downgrades.
“The bank has experienced serious governance issues and practices. RBI made all efforts to facilitate the restructuring and exploring opportunities to infuse capital to the bank which did not materialise,” it said.
The central bank has appointed ex DMD and CFO of public-lender State Bank of India Prashant Kumar as an administrator.
The board of the bank has been superceded for a period of 30 days.
The decision comes shortly after the news agency PTI reported that State Bank of India, LIC and a few other private banks are likely to come together to rescue the bank.
Yes Bank crisis
The city-headquartered Yes Bank, once the darling of investors, has been facing difficulties ever since new chief executive Ravneet Gill took charge last March and revealed massive stress in the loan book. It had to provide against the stress and was also forced to go slow on fresh loans.
Yes Bank has been struggling to raise USD 2 billion in equity for the last few months. Many proposals came up for discussions, but none fructified.
Reports have pointed out to difficulties on the capital position at Yes Bank, speculating if it can meet the minimum thresholds by March in the absence of an infusion.ADVERTISEMENT
Significantly, public sector lender SBI along with some other financial institutions have come forward to bail out capital-starved Yes Bank, PTI reported quoting sources. There were reports that LIC has been asked to team up with the public sector bank for the stake buy. Together, their holding has been pegged at 49 per cent. LIC already owns 8 per cent of the crisis-hit Yes Bank.
Such a deal, if it happens, will also be significant because it will be the first time in many years that a state-run entity has rescued a private sector universal bank.
Following the 2008 financial crisis, there was a huge outcry in the developed markets like the US for public money being used to bail out erring private entities.
Sources, quoted by the PTI said the government has cleared a plan for the SBI-led consortium to acquire a controlling stake in Yes Bank.
There was a discussion on the issue at SBI’s board meet in Mumbai, but it was not immediately clear if any decision was made.
Action is likely to shift to the national capital from here on, because picking up a stake in any bank may require changes in the State Bank of India Act as well, sources said.
The ongoing Budget session of Parliament offers the government a window to ensure that needful amendments are passed, they said.
This will also be the second universal bank after IDBI Bank where LIC will be playing the role of a knight in shining armour.
Reports of the government asking SBI to help Yes Bank led to a huge rally in the private sector lender’s stock, which closed 25.77 per cent up at Rs 36.85 at the end of trade. The total market capitalisation of the bank stands at Rs 9,398.6 crore.
However, brokerages were not enthused by the rally and at least two of them said the stock is now worth Re 1 per piece.
Terming it as a “quasi-sovereign bailout”, J P Morgan said, “We believe forced bailout investors will likely want the bank to be acquired at near-zero value to account for risks associated with the stress book and likely loss of deposits.”
Interestingly, a few months ago, SBI chief Rajnish Kumar had opined that Kotak Mahindra Bank is best suited to take over the troubled Yes Bank.
He had also said Yes Bank is a good franchise with a visible brand and right technology investments.
Yes Bank’s share price has declined by over 80 per cent from a peak of Rs 400 since the removal of its co-founder and chief executive Rana Kapoor by the RBI on corporate governance concerns following two consecutive years of bad asset under-reporting to the tune of over Rs 10,000 crore.
Kapoor holds only 900 shares of the bank now, after defaulting on a loan against pledged shares and the lenders revoking the securities in September last year.
Over 62 per cent of the Yes Bank book is high-value corporate loans, and some of its bets on infrastructure, energy, non-banks and media space have backfired for the lender, leading Gill to flag the potential stress of Rs 10,000 crore.
Even as it was struggling to get capital, the board of Yes Bank had earlier this year cleared a new capital raising plan of Rs 10,000 crore.
According to reports, some investors continue to be interested in the bank, but are wary. SBI and LIC coming on board is expected to boost their confidence, sources said on Thursday.
In a clarification to stock exchanges on Yes Bank-related news reports, SBI said it would disclose developments, if any, as per Sebi regulations.
“… we will abide by the timelines under Regulation 30 of Sebi (LODR) Regulations 2015 in disclosing the developments if any in the matter to stock exchanges,” it said.
Meanwhile, Yes Bank said, as on date, it has not received any such communication from the RBI or any other government or regulatory authorities or from the SBI.
Any deal will also have to pass regulatory muster.
It can be noted that former deputy governor of RBI R Gandhi sits on the board of Yes Bank.
The private sector lender is set to announce its quarterly earnings for October-December 2019 period on March 14, after it requested for a delay because of its capital raising plans.
Yes Bank depositors can only withdraw Rs 50,000 from their accounts starting today till April 3, but there are exceptions that will be considered
The Indian government has given a go ahead to a plan State Bank of India (SBI) to lead a consortium that will buy a stake in troubled Yes Bank Ltd.
However, while this works out, Yes Bank depositors can only withdraw Rs 50,000 from their accounts starting today till April 3. This Rs 50,000 cap is an aggregate amount across all bank accounts at Yes Bank – savings, deposits or current accounts.
Exceptions will be made in a few cases and ‘competent authority’ will decide on these exceptions. The amounts in these cases cannot be more than Rs 5 lakh or the amount of money that is in the accounts (whichever is less).
Grounds of exception that will be considered are:
-Medical treatment for account holder or dependants
-Higher education costs for account holder or dependants in India or abroad
-Marriage expenses
-‘Unavoidable emergencies’
RBI has said that interest will be paid on deposits at the bank.
If you are paying an EMI from your Yes Bank account you need to speak to your receiving bank or housing company immediately and ask for a one-month window to sort things.
If your salary comes to your Yes Bank account then you might need to figure out some other funds.
Net banking might not work right now for you because too many people might be trying to log in at this point of time. ATM withdrawals might also not be possible immediately, you should try at a later time.
YES Bank’s online banking disrupted after RBI caps withdrawals
The Reserve Bank of India has, however, said that it would explore a plan for the bank’s reconstruction or amalgamation, which it hoped to finalise well before the period of moratorium ends. The moratorium came into effect at 6 pm.
Crisis ridden private banking company Yes Bank’s online banking website became non-functional within hours of a Reserve Bank of India notification putting a cap of Rs 50,000 on withdrawals from the bank till April 3, 2019 came into effect at 6pm on Thursday.
The website said the disruption was due to “heavy traffic”, however, it was not clear if the RBI imposed withdrawal limit was the real reason.
“Dear Customer, due to heavy traffic on our NetBanking, we are temporarily unable to process your request. Please try again later or use the YES mobile app to carry out your transactions,” the message flashed on the bank’s online banking page said.
Account holder in the bank said they were unable to withdraw money from ATMs as well.
“Dear customer, your magstripe debit card has been stopped as per RBI direction,” the message flashed on the Yes Bank ATM kiosk.
The Reserve Bank of India has, however, said that it would soon find a solution to the present financial crisis faced by the bank by exploring a plan for the bank’s reconstruction or amalgamation, which it hoped to finalise well before the period of moratorium ends. The moratorium came into effect at 6 pm on Thursday.
The notification said, the financial position of Yes Bank Ltd. (the bank) has undergone steady decline largely due to “inability” of the bank to raise capital to address potential loan losses and resultant loan downgrades.
Assigning further reasons for the decline, the notice says the bank has also faced “serious governance issues’ and practices in the recent years.
The crisis has triggered withdrawal of deposits from the bank, it added.
The RBI has been in constant touch with the bank management to find ways to improve its financial condition. The notice said that several private investors who had shown interest backed out after holding discussions with the RBI.
The RBI notification says that the RBI had “no alternative” but to apply to the central government for imposing a moratorium under section 45 of the Banking Regulation Act, 1949.
The Board of Directors of Yes Bank Ltd has also been superseded for a period of 30 days and Prashant Kumar, ex-senior official of the State Bank of India has been appointed as the administrator.
