As RBI releases rescue plan, Yes Bank says solution likely in 30 days

Mumbai, March 6 (SocialNews.XYZ) As the Reserve Bank of India and the government step up to resurrect Yes Bank, its new administrator Prashant Kumar on Friday said a solution is being worked upon to revive the bank well before the 30-day moratorium period ends.

"The current moratorium has been brought into effect keeping the depositors' interest in mind and for restoring their confidence. A solution is being worked upon to revive the bank well before the moratorium period of 30 days ends. The bank is also taking necessary steps to ensure seamless transactions for the customers.

"We assure the depositors that their money is safe and there is absolutely no reason to panic. Look forward to the continued support from the depositors" as an advisory to customers," Prashant Kumar, who has been appointed administrator for Yes Bank by the RBI, said in a statement released by the bank.

The moratorium started on Thursday and will continue for a month. From Friday, depositors at India's fourth largest private lender will not be able to withdraw more than Rs 50,000 of their own hard-earned money.

The RBI imposed these restrictions late on Thursday in a move which some say was overdue, leaving the depositors in a tizzy. For the next 30 days, Yes Bank will also not be able to grant or renew any loan or advance, make any investment, incur any liability or agree to disburse any payment.

The financial position of Yes Bank underwent a steady decline largely due to the inability of the bank to raise capital to address potential loan losses and resultant downgrades, triggering panic among the investors.

The annual report of the bank for 2018-19 showed that its capital adequacy ratio was the lowest in three years as of March 2019 at 16.5 per cent. This ratio further fell to 16.3 per cent by the end of September 2019.

The mess ran deep in Yes Bank. The RBI has said that Yes Bank experienced "serious governance issues and practices" in recent years which led to the steady decline of the bank. There was the famous fall out between the two co-promoter families to begin with, where Rana Kapoor and his sister-in-law Madhu Kapur fought a public battle over the control of the bank.

Then came bad loans and as of March 2019, the bank had under-reported these by over Rs 3,000 crore. As an independent director, Uttam Prakash Agarwal resigned this January after citing corporate governance issues at the bank. Before that, the RBI had unceremoniously asked Rana Kapoor to leave the board of the private lender.

Earlier, RBI had put the draft scheme for the revival of Yes Bank in public. India's biggest lender State Bank of India has expressed its willingness to make investments in Yes Bank and participate in its reconstruction scheme, the RBI said.

Earlier in the day, RBI Governor Shaktikanta Das had assured Yes Bank depositors that a resolution plan will be announced in 30 days. RBI placed Yes Bank under a moratorium on Thursday, saying it was taking control of the bank for 30 days and would work on a revival plan.

"SBI has expressed willingness to invest in Yes Bank. Strategic investor bank cannot reduce its holding in Yes Bank below 26 per cent before three years," RBI said in the draft proposal.

The RBI had invited suggestions and comments from members of the public, including the banks' shareholders, depositors and creditors on the draft scheme. The draft scheme has also been sent to Yes Bank and SBI for their comments. RBI will receive suggestions up to March 9 and thereafter take a final call.

As per the scheme, the authorised capital shall stand altered to Rs 5,000 crore and number of equity shares will stand altered to Rs 2,400 crore of Rs 2 each.

The investor bank shall not reduce its holding below 26 per cent before completion of three years from the date of infusion of the capital into Yes Bank.

Source: IANS