90-day credit at 8.4% interest will enable bank to meet immediate liquidity needs
The Reserve Bank of India (RBI) will throw an immediate lifeline to the beleaguered Yes Bank by offering it a loan of Rs 10,000 crore under a special liquidity facilty against its government securities, sources close to the development told FE.
The 90-day RBI credit will be provided at an interest rate of 8.4% to enable the bank to cater for immediate liquidity requirements, one of the sources said. One of the likely conditions for the loan would be that the bank can’t use this special liquidity to invest in non-SLR securities, the source added.
The emergency funding plan comes even as the central bank has unveiled a draft reconstruction scheme for the capital-starved Yes Bank, under which State Bank of India is expected to buy up to 49% in the country’s fourth-largest private lender.
The central bank had in 2004 extended a similar facility of Rs 463.5 crore to the crisis-hit Global Trust Bank (GTB) for 90 days to enable it to tide over a liquidity crisis, before the lender’s merger with Oriental Bank of Commerce.
The RBI on Thursday superceded Yes Bank’s board for 30 days on ground of a “serious deterioration” in its financial position and the absence of a viable revival plan. On the same day, the government imposed a moratorium on the bank up to April 3. During this period, the ordinary withdrawal by a depositor of Yes Bank is capped at Rs 50,000.
While the draft reconstruction plan has sought to address fears of depositors by specifying that SBI has evinced interest to invest, it has also suggested a permanent write-down of the additional Tier-1 capital, stoking fears among these bond holders who are reportedly contemplating legal action against the move. Such bonds amount to Rs 10,800 crore. For its part, the central bank, however, said: “This is in conformity with the extant regulations issued by RBI, based on the Basel framework.”
Yes Bank accounts for about 2.3% of the country’s total bank loans and 1.6% of domestic deposits.