Mumbai: Within a span of two days, Yes Bank has gone from staring at a collapse to being revived with the help of the State Bank of India. For now, the bank remains under an RBI moratorium and most customers cannot withdraw more than Rs 50,000.
This weekend will be one of unease for Yes Bank customers after the Reserve Bank of India capped withdrawals from most accounts at Rs 50,000 for the next month. The RBI took the significant step Thursday night when it placed the cash-starved Yes Bank under moratorium. The RBI said it was concerned about the financial situation at Yes Bank, which has been battling a bad loan book and has been unable to raise money.
By Friday evening, there was some glimmer of hope for Yes Bank's customers who spent most of the day queuing up outside ATMs and branches in an effort to withdraw whatever money they could. The RBI released a draft plan to revive the crisis-hit bank. According to the draft plan, the state-run State Bank of India will invest money in Yes Bank and own 49 per cent of its shareholding.
Will the plan save Yes Bank from collapsing? We will find out in the coming days. For now, in case you've missed the drama of the last twenty-four hours, here's a full recap of all that's happened at Yes Bank.
Late Thursday night, news broke that the Reserve Bank of India had placed Yes Bank under moratorium. What this meant was that Yes Bank customers could withdraw only up to Rs 50,000 from their accounts for the next one month. The Rs 50,000 per Yes Bank account cap will be waived in certain situations.
The RBI also superseded Yes Bank's board and appointed Prashant Kumar, a former chief financial offer at SBI, as the bank's administrator. The RBI said that the emergency measures would apply until April 3 for now and that the steps were being taken due to Yes Bank's precarious financial position. Ironically, the RBI move came at the end of a day when Yes Bank stocks had rallied on the markets on the back of speculation that an SBI-led consortium was preparing to invest in the bank.
Like most banks in India, Yes Bank faces a crisis of non-performing assets, i.e. loans that have either gone bad or where repayments have been delayed for too long. Partly due to this, Yes Bank's capital eroded. For the last several months, the bank has been hunting for cash in the form of fresh investment. The hunt, however, came up empty.
Apart from this, Yes Bank also faced governance issues. According to a Business Today report, Yes Bank underreported NPAs to the tune of Rs 3,277 crore in 2018-19. The report also says that the bank's management misled the RBI by indicating to the central bank that talks with investors on pumping in equity were likely to be successful.
All these factors led the RBI to conclude that there was no "credible revival plan" and so "in public interest and the interest of the bank's depositors" there was "no alternative" but to place the bank under moratorium, according to a central bank statement.
For now, it's a wait-and-watch game. The RBI has unveiled a draft revival plan aimed at pumping fresh money into Yes Bank. However, as things stand, Yes Bank customers cannot withdraw from than Rs 50,000 from their accounts, except in certain specific situations.
On Friday, customers faced hurdles withdrawing money from ATMs or accessing internet banking due to apparent network issues at Yes Bank. As of Friday evening, there was no clarity on the status of these services and when they would be fully restored.
The government sent out a message of assurance with Finance Minister Nirmala Sitharaman saying that the immediate priority was to ensure that Yes Bank customers are able to withdraw money within the Rs 50,000 limit.
Addressing a press conference in Delhi, Finance Minister Nirmala Sitharaman said that the State Bank of India had expressed interest in investing in Yes Bank. Sitharaman's comments came just as the Reserve Bank of India unveiled a draft revival plan.
Under the draft plan, SBI would invest money in Yes Bank and own 49 per cent of the restructured bank. Yes Bank's market value would also be revised to Rs 5,000 crore with 2,400 crore equity shares with a value of Rs 2 each.
The capital infusion would happen with SBI paying at least Rs 10 per share and not the face value of Rs 2. According to a back-of-the-envelope calculation, at Rs 10 per share, SBI would have to fork out Rs 11,760 crore to own 49 per cent of the restructured Yes Bank.
The other measures of the RBI's draft plan include a new board and an assurance that Yes Bank employees would work under the same salary and terms of employment as before. "Key managerial personnel", however, could be let go by the new board if it so wishes.
All eyes now will be on the State Bank of India. Earlier in the day, SBI chairman Rajnish Kumar, while assuring Yes Bank customers that their interests will be protected, had said that the bank would take a call on its next move based on the revival plan prepared by the RBI.
SBI -- as well as the general public -- now has time until Monday to comment or make suggestions on the RBI's draft plan. Once the RBI finalises its draft plan, the SBI will likely reveal its hand. There is already speculation that SBI might lead a consortium or tie up with the Life Insurance Corporation of India to invest in Yes Bank.
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