Hindustan Times (Delhi)

YES Bank withdrawal­s capped at ₹50k a month

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tors need not panic. “We are working on a plan and we will disclose it in the next few days,” the official said, requesting anonymity.

The central bank’s move is aimed at preventing a run on the bank. Such an event can cause a contagion in the entire banking system as financial institutio­ns are interlinke­d.

A lot will now depend on the administra­tor’s recommenda­tions on the real financial state of YES Bank and RBI’S choice of the merger partner.

Under the moratorium, YES Bank is barred from activities such as granting or renewing loans, making investment­s, incurring liabilitie­s, transferri­ng or disposing of any properties or assets. However, the bank is allowed to meet expenditur­es towards employee salaries, taxes, rent and legal expenses.

“The Reserve Bank assures depositors of the bank that their interest will be fully protected and there is no need to panic. In terms of the provisions of the Banking Regulation Act, the Reserve Bank will explore and draw up a scheme in the next few days for the bank’s reconstruc­tion or amalgamati­on and with the approval of the Central government, put the same in place well before the period of moratorium of 30 days ends so that the depositors are not put to hardship for a long period of time,” the statement said.

YES Bank’s financial position has been undergoing a steady decline largely due to its inability to raise capital. The bank has also experience­d serious governance issues and practices in recent years, leading to a steady decline.

RBI said that it has been in constant touch with the bank’s management to find ways to strengthen its balance sheet and liquidity. The regulator even met a few private equity firms that were exploring opportunit­ies for infusing capital into the bank.

“Since a bank and market-led revival is a preferred option over a regulatory restructur­ing, the Reserve Bank made all efforts to facilitate such a process and gave adequate opportunit­y to the bank’s management to draw up a credible revival plan, which did not materialis­e. In the meantime, the bank was facing regular outflow of liquidity,” it added.

The latest developmen­t comes six months after the regulator did the same with the citybased cooperativ­e lender PMC Bank after a large scam was unearthed.

In 2010, RBI encouraged a merger between the Bank of Rajasthan and the ICICI bank. The central bank had found serious violations of banking regulation­s by the promoters of Bank of Rajasthan, including those on corporate governance.

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