RBI puts cap on Yes Bank withdrawals

■ Administrator appointed; `50K limit set on withdrawals

Mumbai: Troubled private sector lender Yes Bank was placed under a “moratorium” late on Thursday, with the RBI capping depositor withdrawals at `50,000 per account for a month and superseding the board with immediate effect. The Reserve Bank of India (RBI) took the decision in consultation with the government to protect depositors’ interest. The RBI also superseded the board of Yes Bank, which has not been able to raise required capital for the last six months. It also appointed former Chief Financial Officer of SBI, Prashant Kumar as the administrator of Yes Bank. The curbs on Yes Bank come after similar action was taken against cooperative lender PMC Bank in September. ■

Deep in trouble Yes Bank was placed under a "moratorium" on Thursday night, with the RBI capping depositor withdrawals at Rs 50,000 per account for a month and superseding the board with immediate effect.

The Reserve Bank of India said the decision was taken in consultation with the government to protect depositors' interest.

The RBI also superseded the board of private bank, which has been struggling to raise required capital for the last six months. The central bank also appointed former chief financial officer of SBI, Prashant Kumar, as the administrator of Yes Bank.

"The Reserve Bank came to the conclusion that in the absence of a credible revival plan, and in public interest and the interest of the bank's depositors, it had no alternative but to apply to the central government for imposing a moratorium under Section 45 of the Banking Regulation Act, 1949," the RBI said in a statement.

The statement said the bank management had indicated that it was in talks with various investors and they were likely to be successful.

The bank was also engaged with a few private equity firms for capital raising. "These investors did hold discussions with senior officials of the Reserve Bank but for various reasons eventually did not infuse any capital.

"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," the statement said.

In the meantime, the bank was facing regular outflow of liquidity, the apex bank said, justifying its actions.

The actions come hours after reports emerged that the government has approved to a plan by which State Bank of India and other financial institutions would bailout Yes Bank.

If the plan is implemented, it would be the first major instance in many years where a private sector lender would be bailed out using public money.

The curbs on Yes Bank come after similar action was taken against PMC Bank in September.