YES Bank In Trouble; RBI Caps Withdrawals At Rs 50K

The Reserve Bank of India (RBI) imposed a moratorium on Yes Bank effective Thursday restricting withdrawals to Rs 50,000 citing “serious deterioration in the financial position of the Bank.”

Withdrawals above Rs 50,000 will require RBI’s permission.

This moratorium will be valid from 6 pm on March 5 to April 3, 2020. The restriction is valid across all types of accounts, including savings, current and other deposits.

RBI, however, may permit the bank to allow withdrawals of over Rs 50,000 in the following conditions:

– in connection with the medical treatment of the depositor or any person actually dependent on him

– towards the cost of higher education of the depositor or any person actually dependent on him for education in India or outside India

– to pay obligatory expenses in connection with marriage or other ceremonies of the depositor or his children or of any other person actually dependent upon him

RBI justified the restrictions claiming that YES Bank’s financial health is declining due to its inability to raise capital to address potential loan losses and resultant downgrades, triggering invocation of bond covenants by investors, and withdrawal of deposits. “The bank has also experienced serious governance issues and practices in the recent years which have led to steady decline of the bank,” RBI said in a statement.

The central bank has appointed State Bank of India’s (SBI) ex-DMD and CFO, Prashant Kumar, as administrator.

Livemint had earlier reported that the Finance Ministry and RBI are trying a capital infusion of Rs12,000-14,000 crore in Yes Bank, primarily by a consortium led by the country’s largest lender SBI.

RBI is constantly engaging with the bank’s management to find ways to strengthen its balance sheet and liquidity. The bank says various investors are interested to come on board.

RBI, in a statement, said that in the absence of a credible revival plan, it has to apply to the Central Government for imposing a moratorium under section 45 of the Banking Regulation Act, 1949 in order to protect the depositors.