Deposits, jobs safe: FM Falling rupee adds to panic selling in market

IBC lends lifeline for distressed firms: Sahoo

The insolvency law provides a new lifeline for stressed companies to save them from premature death, IBBI chairman M S Sahoo said. Speaking at an event, Sahoo said the IBC provides a new lifeline to a company that has a value and has to be saved from premature death. He said the average life of S&P 500 companies has reportedly come down from 90 years to 18 years over the last century.

A day after the central bank placed cashstrapped Yes Bank under moratorium where account holders can’t withdraw more than Rs 50,000 a month, finance minister Nirmala Sithraman, on Friday, assured all depositors and staff of the bank, saying that deposits and liabilities of all depositors will be honoured, while Yes Bank jobs and salaries are assured at least for one year.

“We are working to protect the interests of the depositors and also those who invested in Yes Bank. Our immediate priority is to ensure that Yes Bank’s customers are able to withdraw money within the stipulated cap,” Sitharaman said.

Addressing a press met after the RBI superseded the board of Yes Bank, Sitharaman said the bank was being monitored since 2017, and developments relating to it were being monitored on a day-to-day basis since.

Nirmala Sithraman

“The government has already asked the RBI to look into what went wrong at Yes Bank and fix individual responsibilities. I want the central bank to ensure that due process of law is set to roll with a sense of urgency so that we should find out as to who led to the problem of this size and magnitude,” she said.

The finance minister pointed out that the exposure of Yes Bank to stressed assets has been there since 2014. “Since 2017, it was noticed that there were governance issues and weak compliance in the same bank. There was a wrong asset classification together with risky credit decisions,” she said.

“These decisions were taken in the interest of the bank’s financial health, and a new CEO was appointed in September 2018 and cleaning up of the bank started,” she said, adding that investigative agencies too had found irregularities and even markets regulator Sebi will also be looking into the issue.

Besides, the finance minister also pointed out that some leading corporates such as Anil Ambani Group, Essel, ILFS, DHFL and Vodafone were among the stressed ones Yes Bank had exposure to.

“The government, she said, wants the RBI to ensure that due process of law is followed with a sense of urgency. The restructuring scheme will be fully effective within 30 days,” she said, adding, “State Bank of India has expressed willingness to invest in Yes Bank.”

A sharp fall across markets in the US, Asia and Europe over the rapid spread of coronavirus cases and the RBI restricting withdrawals from troubled Yes Bank and superseding its board led to panic selling in the Indian market by the foreign investors.

The Indian currency also hit a new low as it crossed the Rs 74 per US dollar mark in intra-day trading, touching a low of 74.08 and finally closed at a 16-month low of Rs 73.72, down 37 paise.

The Sensex hit a low of 37,011.09 as it fell 1459.52 points intra-day and the Nifty-50 sank well below the 11,000 mark to 10,827.

The Sensex finally closed 2.32 per cent, or 893.99 per cent, down at 37,576 and the Nifty closed at 10,979, down 279.55 points, or 2.57 per cent.

The weaker rupee seems to have led to higher selling by the foreign portfolio investors offloading equity assets worth Rs 3,594.84 crore, as per provisional data.

“The rising cases of coronavirus outside China has led to serious worries of a prolonged global economic slowdown. In fact, this event has introduced additional downside risks to our earnings estimates for FY21,” analysts from Motilal Oswal Financial Services said.

Globally, confirmed cases soared above the 1 lakh mark as regions in

US and Europe have started reporting higher number of new cases.

Back home, overnight action by the central bank to save Yes Bank from failing dented sentiments among the domestic equity market investors and leding to heavy selling in the bank and other financial sector stocks.

NSE’s Nifty Bank Index fell 3.52 per cent, with heavyweights like SBI down 6.48 per cent as it will buy up to 49 per cent stake in Yes Bank for Rs 2,450 crore, as per the details given in RBI’s draft revival plan for Yes Bank.

Yes Bank shares fell 85 per cent intra-day to a low of Rs 5.55 on the BSE and Rs 5.65 on the NSE. Though there was some recovery, Yes Bank still closed 56.04 per cent down at Rs 16.20 on the BSE.

Global rating agency Fitch Ratings said the Reserve Bank of India takeover of Yes Bank casts light on governance risks in India's banking sector.