Yes Bank crisis: RBI puts a cap on large withdrawals







Autoplay Autoplay 1 of 7 RBI steers Yes Bank's future The Reserve Bank of India has put an end to the uncertainty on the future of Yes Bank and imposed a month-long moratorium. After restricting business transactions, the central bank assured that these actions were taken to protect the interests of depositors. What did the notification say? As per a notification issued by the Ministry of Finance, Yes Bank customers cannot withdraw more than Rs 50,000 in the next 1 month. The order comes into effect on March 5 and the cap will be in place till April 3, 2020. Who gets impacted? The cap on withdrawals will impact all customers, especially retirees, who deposited their life savings in the bank. For other retail customers, the central bank will relax the withdrawal limit in the event of medical emergencies, higher education fees or marriage expenses — up to a cap of Rs 5 lakh.





According to some media reports, regular transactions-- fund transfer, cheque clearance & EMI debits-- will not get impacted. But all-cash withdrawals will be capped within the Rs 50,000 limit. What happens to employees? It depends on the acquiring entity. In times of distress mergers, there is a huge possibility of cost-cutting, trimming roles and letting go of the employees. Impact on its corporate customers According to some media reports, the senior bankers believe that the companies which have a line of credit from Yes Bank or have bank guarantees may face difficulties. Hence to avoid the liquidity crisis, SMEs and other businesses should look for alternate options.

The Reserve Bank of India (RBI) today placed in public domain a draft scheme for reconstruction of Yes Bank State Bank of India has expressed its willingness to make investment in Yes Bank and participate in its reconstruction scheme. SBI can invest for up to 49 per cent stake for nearly Rs 2,450 crore.The central bank had invited suggestions and comments from members of public, including the banks' shareholders, depositors and creditors on the draft scheme. Suggestions will be received by RBI till Monday, March 9, 2020, after which a final call will be taken.Earlier in the day, RBI governor Shaktikanta Das had assured depositors that resolution efforts were being taken to maintain "stability and resilience" in the financial sector and hurdles would be cleared "very swiftly".RBI placed Yes Bank under a moratorium late on Thursday, saying it was taking control of it for 30 days and would work on a revival plan. RBI also named Prashant Kumar, SBI's former chief financial officer, as Yes' administrator. The central bank also limited withdrawals to Rs 50,000.Here is everything you need to know about the proposed plan:* RBI says that State Bank of India (SBI) has expressed its willingness to make investment in Yes Bank and participate in its reconstruction scheme.* All employees of the reconstructed Yes Bank will continue with the same pay for at least one year.* RBI plans to alter the authorised capital for the reconstituted bank to Rs 5,000 crore and number of equity shares will also be altered to 24,000 crore of Rs 2 each aggregating to Rs 48,000 crore.* It has been proposed that the investor bank will not reduce its holding in the new bank below 26 per cent before completion of three years from the date of infusion of the capital.* The investor bank shall agree to invest in the equity of the reconstructed bank to the extent that post infusion it holds 49 per cent shareholding in the bank at a price not less than Rs 10 (Face value of Rs 2 and premium of Rs 8).* A new board will be constituted.* The plan proposes that Board of Directors of the Reconstructed Bank will have the freedom to discontinue the services of the Key Managerial Personnel (KMPs) at any point of time after following the due procedure.* The investor bank shall have two nominee directors on the Board of the Reconstructed Bank.* RBI may appoint additional directors. It will be open to the Board of directors of Yes Bank to co-opt more directors to it.* It will be open to the reconstructed bank to open new offices and branches or close down existing offices or branches, in accordance with the extant policy of the Reserve Bank and complying with the necessary terms and conditions.