Money & Banking

SBI says in-principle approval to explore investment in Yes Bank

Our Bureau Mumbai | Updated on March 06, 2020

Analysts said the move will be credit negative for Yes Bank. File Photo   -  Bloomberg

Concerns over withdrawals rising

The moratorium and superseding of Yes Bank Board is the first such instance in 15 years that the government and the Reserve Bank of India (RBI) have actively intervened and come to the rescue of a lender. Sources indicated that a merger or bailout package with State Bank of India is likely to be hammered in the next few days.

In a late night regulatory filing, State Bank of India said an in-principle approval has been given by its Central Board which met on Thursday to explore investment opportunity in Yes Bank. In a regulatory filing on Friday, Yes Bank said the RBI appointed administrator has taken charge. “Prashant Kumar, ex-DMD and CFO of State Bank of India who has been appointed as the Administrator by the Reserve Bank of India under Section 36ACA(2) of the Banking Regulation Act, 1949 has taken charge with effect from today,” it said.

The last time such an instance took place was in the case of Global Trust Bank in 2004 when the RBI had put the crisis ridden bank under a three month moratorium. It was eventually merged with Oriental Bank of Commerce.

 

While the RBI has assured depositors that their interest will be fully protected and there is no need to panic, the ₹50,000 cap on withdrawals seems to have caused worries for many. Many users reported on Twitter that the bank’s netbanking website was not working.

Analysts said the move will be credit negative for the bank. Alka Anbarasu, vice president – Senior Credit Officer, Financial Institutions, Moody’s Investors Service said, “RBI’s moratorium on Yes Bank is credit negative as it affects timely repayment of bank depositors and creditors. While Moody’s expects Indian authorities will take steps to prevent the weakness in the bank’s viability from significantly impacting its depositors and senior creditors, the lack of a coordinated and timely action highlights continued uncertainty around bank resolutions in India.”

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Published on March 06, 2020
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