RBI restricts withdrawals from cash-strapped Yes Bank at ₹50,000

The Reserve Bank of India on Thursday (March 5) imposed a moratorium on cash-strapped Yes Bank and capped withdrawals at ₹50,000. The central bank also superseded the board of the troubled lender with immediate effect.

Former SBI CFO Prashant Kumar has been appointed as administrator for Yes Bank. The latest development comes six months after the regulator did the same with the city-based cooperative lender PMC Bank after a large scam was unearthed.

The private sector lender has been grappling with mounting bad loans. Earlier in the day, sources said a consortium led by the State Bank of India would bail out capital-starved Yes Bank, with the government giving the go-ahead.

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In a press release on Thursday, the RBI said the financial position of Yes Bank Ltd. has “undergone a steady decline largely 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”.

It said the bank has also experienced serious governance issues and practices in the recent years which have led to steady decline of the bank.

“The Reserve Bank came to the conclusion that in the absence of a credible revival plan… it had no alternative but to apply to the central government for imposing a moratorium under section 45 of the Banking Regulation Act, 1949. Accordingly, the central government has imposed moratorium effective from today,” it said.

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Further, the central bank also assured the depositors of the bank that their interest will be fully protected and there is no need to panic.

“In terms of the provisions of the Banking Regulation Act, the Reserve Bank will explore and draw up a scheme in the next few days for the bank’s reconstruction or amalgamation and with the approval of the Central Government, put the same in place well before the period of moratorium of thirty days ends so that the depositors are not put to hardship for a long period of time,” the press release said.

The Reserve Bank has also issued certain directions to the bank under section 35A of the Act ibid, the press release said.

Meanwhile, shares of Yes Bank jumped nearly 26.96 per cent to ₹37.20 apiece on the NSE on Thursday.

(With inputs from agencies)