Why Yes Bank is not PMC Bank-like failure: Key differences which may make depositors breathe easy

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March 6, 2020 12:31 PM

Within months of a small cooperative bank fallout in India, major private player YES Bank has also come under the RBI action for mounting bad loans, raising concerns if YES Bank is also headed for the PMC path.

RBI governor Shaktikanta Das has also reiterated that the people don’t need to panic as the central bank “will come out with a scheme”.

Within months of a small cooperative bank fallout in India, major private player Yes Bank has also come under the RBI action for mounting bad loans, raising concerns if Yes Bank is also headed for the PMC fate. While it may look like Yes Bank has PMC-like failure written all over it, the same may not likely be the case as there are certain key differences between RBI’s handling of Yes Bank case and PMC debacle. RBI has imposed a 30-day moratorium period on the Yes Bank while the same in the case with Punjab and Maharashtra Co-operative Bank was set to six months, with no forward looking outlook from the Reserve Bank of India.

Further, the withdrawal limit is also different in the case of PMC and Yes Bank as RBI had capped the limit to Rs 1,000 in the former’s case while for Yes Bank, it stands at Rs 50,000. In fact, RBI has also said that it is ready to make exceptions to the upper limit of withdrawal in special cases such as a wedding, illness, and school fees, etc.

Meanwhile, RBI governor Shaktikanta Das has also reiterated that the people don’t need to panic as the central bank “will come out with a scheme, as we said in the press statement,” he told reporters on Friday. He also said that “very swift action will be seen from RBI to revive Yes Bank.” To some relief to salaried account holders, the RBI imposed a moratorium on the private bank on 5 March 2020, by which time those account holders may have got their salaries credited. The RBI moratorium is set to end on 3 April 2020, just a few days over the next due date for salary credits. Further, the RBI has explicitly said that it expects a resolution well before the moratorium period ends.

The board of Yes Bank was superseded on Thursday by the RBI and former SBI CFO Prashant Kumar was appointed as the administrator for the private bank. RBI also said that Yes Bank experienced “serious governance issues and practices” which led to the decline of the bank. Yes Bank was a lender to major corporate defaulters such as DHFL, Jet Airways and Cafe Coffee day, among others.

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