The Reserve Bank of India on Friday announced a reconstruction plan for troubled private lender Yes Bank, just a day after a moratorium and curb on withdrawals created widespread panic among depositors and investors.
The Reserve Bank of India on Friday announced a reconstruction plan for troubled private lender Yes Bank, just a day after a moratorium and curb on withdrawals created widespread panic among depositors and investors. The RBI announced that the State Bank of India will invest in the reconstructed bank for up to 49% stake. SBI will buy new equity in the bank at a minimum of Rs 10 per share, including Rs 8 per share premium. According to back of envelope calculations, SBI will invest about Rs 2,450 crore of equity capital into Yes Bank. Yes Bank has a paid up share capital of over 255 crore shares of Rs 2 face value each. 49% of post-issue share base would be at about 245 crore shares of face value Rs 2, plus a premium of Rs 8 each.
In its proposed resolution plan, the RBI has altered Yes Bank’s Authorised Capital to Rs 5,000 crore; and the number of equity shares to 2,400 crore of Rs 2 each. Further, it has proposed SBI cannot reduce its holding below 26% before the completion of 3 years from the date of capital infusion. However, the reconstruction plan is a draft and RBI has sought comments on the same latest by 9 March 2020.
Meanwhile, the Finance Minister has asked the central bank to assess what went wrong with Yes Bank and also identify the role played by individuals. Yes Bank has come under the government scanner as its bad loans have been mounting. The Bank has lent money to some of the major corporate defaulters such as Cox & King, Cafe Coffee Day and Jet Airways. “Anil Ambani group, DHFL, Vodafone, Essal Group are some of the stressed corporates which Yes Bank was exposed to, prior to 2014,” Finance Minister Nirmala Sitharaman said.
Earlier in the day, FM Nirmala Sitharaman had said that the depositors do not need to worry about their money and the RBI is working to come up with a good resolution. Speaking to reporters on Friday, she said that while she understands the concerns of depositors, she assured that the action was in line with the best interest of all. “I am constantly in touch with the Reserve Bank and the steps that are taken in the interest of the depositors, the bank and the economy… the depositors can be assured that their money is safe,” she said. The RBI had earlier imposed a moratorium period for the private lender and capped the maximum withdrawal limit at Rs 50,000 per account. The Yes Bank debacle comes months after PMC fallout.