Yes Bank ‘reconstruction’: Moratorium to be lifted by March 18

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Published: March 15, 2020 6:30:39 AM

Current administrator Prashant Kumar has been appointed the new chief executive of the lender.

Yes Bank, Yes Bank reconstruction, Prashant Kumar, Kotak Mahindra Bank, ICICI Bank, HDFC, Yes Bank Reconstruction Scheme 2020Yes Bank’s authorised share capital has been hiked to Rs6,200 crore from Rs1,100 crore earlier.

The finance ministry has notified a ‘reconstruction scheme’ for Yes Bank, paving the way for removal of curbs on withdrawal and a moratorium on the lender by March 18, roughly two weeks before the April 3 deadline. Current administrator Prashant Kumar has been appointed the new chief executive of the lender.

Meanwhile, Bandhan Bank and Federal Bank have decided to invest Rs300 crore each in Yes Bank. This will be above the Rs3,100-crore investments committed by private players, including ICICI Bank, HDFC, Axis Bank and Kotak Mahindra Bank. SBI has already pledged Rs7,250 crore.

The fate of AT-1 bond holders of Yes Bank, however, still hangs in balance, as the latest notification skips any specific mention of their rights. The RBI’s draft ‘reconstruction’ plan had suggested a permanent write-down of the additional Tier-1 capital of well over Rs8,000 crore, prompting bond holders to initiate legal action against the move.

Nevertheless, some AT-1 holders have interpreted the absence of any such clause in the notification as an implicit acknowledgement of their rights. Financial services secretary Debasish Panda couldn’t immediately be reached for a clarification.

The Yes Bank Reconstruction Scheme 2020, which got the Cabinet approval on Friday and came into force the same day, requires companies other than SBI to hold on to 75% of their investment for at least three years. SBI, too, won’t be allowed to dilute its holding to below 26% for three years.

The three-year lock-in for 75% of holding will apply to existing as well as new investors. However, retail investors with fewer than 100 shares are exempted from this lock-in stipulation. But this means even those holding just 100 shares (or a few more) will have to comply with the rule.

SBI and other new investors won’t be liable for capital gains tax for any deemed profits or gains on account of such share subscriptions.

Finance minister Nirmala Sitharaman had said moratorium and related curbs would be lifted in three working days of the issuance of the gazette notification. After the capital infusion, SBI will hold at least 26% and at most 49% in Yes Bank, according to the scheme. RBI can allow investors (other than SBI) with more than a 9% stake to have voting rights equal to their shareholding or up to 15%, whichever is lower, if they are ‘fit and proper’. Share will be issued in two days.

Yes Bank’s authorised share capital has been hiked to Rs6,200 crore from Rs1,100 crore earlier. The number of equity shares will stand at 3,000 crore of Rs2 each. Authorised preference share capital will continue to be Rs200 crore.

Former non-executive chairman of Punjab National Bank Sunil Mehta will take charge as the non-executive chairman of Yes Bank. Mahesh Krishnamurthy and Atul Bheda will be roped in as non-executive directors on the new board. Apart from these members, SBI will have the right to appoint two additional members on the board and RBI can appoint one or more directors. Any investor with a 15% voting rights will be allowed to nominate a director.

The RBI had on March 5 supreceded the earlier Yes Bank board, citing ‘serious deterioration’ of its financial health. On the same day, the government imposed the moratorium and capped ordinary withdrawals at Rs50,000 crore. The Reserve Bank of India (RBI) had on March 5 put a moratorium on Yes Bank restricting withdrawals to Rs50,000 per depositor till April 3.

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