Mumbai, 5 March 2020: The Reserve Bank of India (RBI) on Thursday imposed a moratorium on the capital-starved Yes Bank and capped withdrawals at Rs 50,000 per account till further orders. It also superseded the Yes Bank board with immediate effect. The RBI took the decision in consultation with the government to protect the interests of the depositors, RBI said in a late evening statement.
The RBI also assured the depositors of the bank that their interest will be fully protected and there is no need to panic. Former SBI CFO Prashant Kumar has been appointed as administrator for Yes Bank.
Inspite of restrictions laid down by the regulator, Yes Bank will be able to pay salaries to its 20,000 plus employees, the RBI said.
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. Yes Bank has been grappling with mounting bad loans.
However, the depositors will be allowed to withdraw more than Rs 50,000 under the following conditions:
• In connection with the medical treatment of the depositor or any person actually dependent on him.
• Towards the cost of higher education of the depositor or any person actually dependent on him for education in India or outside India.
• To pay obligatory expenses in connection with marriage or other ceremonies of the depositor or his children or of any other person actually dependent upon him.
• In connection with any other unavoidable emergency.
After a long span of more than 16 years, this is the first incident that a private sector bank has faced regulator’s action. Earlier in 2004, RBI had merged the Global Trust Bank (GTB) founded by Ramesh Gelli with the Oriental Bank of Commerce (OBC) as failed to recover the loans it had extended to diamond traders.
The Hyderabad head quartered GTB had a very good presence in southern market and OBC was planning to expand in the south then. The government took a very pragmatic decision then, which proved to be a win-win situation for all.
Earlier in the day, sources said SBI along with some other financial institutions would bail out Yes Bank, with the government giving the go-ahead.
It has been hotly discussed in the stock market in last few sessions that centre is contemplating to merge ailing Yes bank with the State Bank of India. However, this information could not be officially confirmed.