YES Bank withdrawals capped at ₹50k a month

MUMBAI: The Reserve Bank of India (RBI) seized control of Yes Bank Ltd, capped withdrawals at ₹50,000 and imposed restrictions on its operations till April 3, as the central bank moves to implement a bailout plan for the troubled lender that was once the country’s fifth largest private lender by assets.

A moratorium usually concludes with the target bank — YES Bank, in this case — being merged with another bank.

In a late evening press release on Thursday, RBI said that it has superseded the board of the private sector lender because of a serious deterioration in its financial position. The central bank named Prashant Kumar, a former chief financial officer of the State Bank of India (SBI), as the administrator of YES Bank.

“This has been done to quickly restore depositors’ confidence in the bank, including by putting in place a scheme for reconstruction or amalgamation,” it said.

A top RBI official said depositors 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 that their interest will be fully protected and there is no need to panic. A scheme will be drawn up in the next few days for the bank’s reconstruction,” the statement said.