SBI to own shares worth ₹2,450 crore in Yes Bank, Chidambaram puzzled

In a bid to resuscitate the capital-starved Yes Bank, the State Bank of India on Saturday (March 7) said it will be issued 245 crore shares at a price of ₹10 each for ₹2,450 crore in the troubled lender. These shares will translate into a 49 per cent stake into the reconstructed bank.

However, former union minister P Chidambaram has termed the SBI’s investment plan as “bizarre”.

In a statement, the SBI said it shall not reduce its holding below 26 per cent before completion of three years from the date of capital infusion. It said the new board of Yes Bank will have CEO and MD, non-executive chairman and non-executive directors.

“All the employees of the reconstructed bank shall continue in its service with the same remuneration and on the same terms and conditions… at least for a period of one year,” said the country’s largest lender.

The Reserve Bank of India (RBI) had on March 5 imposed a 30-day moratorium on the capital-starved Yes Bank, capping withdrawals at ₹50,000 per account and superseded the board of the private sector lender with immediate effect. Subsequently, the RBI said the SBI has expressed its willingness to invest in the troubled banker.

Related news: Chidambaram terms SBI’s investment plan in Yes Bank ‘bizarre’

Earlier on Thursday, SBI chairman Rajnish Kumar said the bank has set a maximum investment limit of ₹10,000 crore for Yes Bank. The cap of ₹10,000 crore is based on the assumption of higher capital requirement by the bank, he added.

Kumar said the effort will be that the resolution plan is approved and implemented before the timeline set by the RBI. He also said the proposed plan will not have any impact on SBI’s balance sheet.

“There is a very marginal impact on the bank’s capital adequacy ratio. As a policy, we maintain all ratios 50 basis points above the minimum regulatory requirement. We will continue to do that without any further raising of the capital from the market and there is no question of requesting the government for any capital,” he said.

Even the interest of SBI’s shareholders will not be compromised under the plan, he said. SBI’s investment in the private sector lender will not lead to conflict of interest, he said.

Meanwhile, the Enforced Directorate continued grilled Yes Bank founder Rana Kapoor for the second consecutive day on Saturday. On Friday, the ED had raided his Mumbai residence and also questioned him in connection with a money laundering probe against him.

Related news: ED grills Yes Bank founder Rana Kapoor over money laundering charges

Official said the case against Kapoor is linked to the scam-hit DHFL as the loans lent by the bank to the company allegedly turned non-performing assets (NPAs), they said. Action against Kapoor is being conducted under the Prevention of Money Laundering Act (PMLA).

When asked about the impact of raids at Kapoor’s house, SBI chairman Kumar said it will not affect the lender’s restructuring exercise. “Yes Bank is an entity and Rana Kapoor is an individual. So if an individual has done something wrong, they will pay the price for that but why should the enterprise suffer,” he said.

Kumar said involvement of SBI in resolving the crisis at the private lender will allay fears of investors and depositors. “Today if the resolution has to happen, you need a credible name with the investors, creditors and depositors of the bank. With SBI standing behind it, there will be stability in the financial market,” he said.

Meanwhile, the political blame-game over the Yes Bank crisis continued on Saturday with Chidambaram blaming the BJP government’s alleged “mismanagement” of financial institutions as the cause behind this fiasco.

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He also termed as “bizarre” the SBI’s plan to invest ₹2,450 crore in the crisis-ridden bank. “Resolution plan proposed by SBI for Yes Bank is bizarre when the bank’s net worth is perhaps zero. It would be better for SBI to take over on RBI’s order with Yes Bank’s loan book at ₹1 and to assure depositors that their money will be returned,” he said.

The Congress leader also said that it is difficult to digest the fact that no one noticed the loan giving spree Yes Bank was indulging in.

“Notice the jump from March 2014 to March 2019. Loan book was allowed to grow despite supervision by RBI and government at 35% a year. How did ₹55,000 crore loan book in March 2014 jump to ₹2,41,000 crore in March 2019 when I was not the Finance Minister?” Chidambaram questioned.

Meanwhile, several Yes Bank ATMs reportedly ran dry on Saturday as panicked customers queued up to withdraw their deposits. However, some said they were able to withdraw the stipulated amount of ₹50,000 through cheques at the bank’s branches.

(With inputs from agencies)