The Reserve Bank of India (RBI) on Thursday said a month-long “moratorium” has been imposed on Yes Bank stressing that the bank’s financial capability has undergone a decline largely due to inability of the bank to raise capital.
The financial position of Yes Bank Ltd. (the bank) has undergone a steady decline largely due to inability of the bank to raise capital to address potential loan losses and resultant downgrades, triggering invocation of bond covenants by investors, and withdrawal of deposits,” RBI said in a statement.
The bank has also experienced serious governance issues and practices in recent years which have led to steady decline of the bank. The Reserve Bank has been in constant engagement with the bank’s management to find ways to strengthen its balance sheet and liquidity,” the statement read further.
In the gazette notification, the government stated that depositors of Yes Bank will not be able to withdraw more than 50,000 rupees irrespective of the no of bank accounts they hold.
The government has however made an exception to the withdrawal limit. In case of unforeseen emergencies, customers can withdraw deposits up to 5 lakh rupees subject to the approval of the RBI.
The central bank has assured depositors that their interests will be fully protected and that there is no need to panic.
Other than capping the withdrawal limit, The RBI has also superseded the board of Yes bank for a period of 30 days in the backdrop of deteriorating financial position of the bank.
Former CFO of SBI – Prashant Kumar has been appointed as the administrator of the debt-ridden private lender.
Significant to note that even though no reason has been cited by the RBI or the government for the decision, reports suggest the order has been passed in view of mounting bad loans, financial irregularities and failure of the bank to infuse fresh capital. There have also been reports of the Yes bank in talks with the LIC and the SBI to infuse capital but nothing has materialized so far.
Today, after the market opened Shares of Yes Bank started at Rs 27.65, down by 24.97%.