Yes Bank Moratorium to be Lifted on 18 March: All You Need to Know

As part of the reconstruction scheme for Yes Bank, SBI, along with private banks, has announced it will invest.

Image used for representational purpose.

(Photo: PTI)

The government has notified the Yes Bank reconstruction scheme as per which the moratorium on the troubled private sector lender will be lifted on 18 March.

Current administrator Prashant Kumar has been appointed managing director and CEO of the newly reconstructed board. The new board, having at least two directors of SBI, will take over within seven days of the issuance of the notification.

The ‘Yes Bank Reconstruction Scheme 2020’, shall come into force on 13 March, the gazette notification said.

"The order of moratorium on the reconstructed bank issued by the government... shall cease to have effect on the third working day at 18:00 hours from the date of commencement of this scheme," the notification said.

The scheme has been notified on 13 March and hence the moratorium will be lifted on the third working day or 18 March.

On Friday, the Union Cabinet had approved the reconstruction scheme for Yes Bank as proposed by the Reserve Bank of India (RBI), with Finance Minister Nirmala Sitharaman saying that cash withdrawal restrictions and other moratorium conditions will be lifted within three days of the notification of the bailout plan for the beleaguered lender.

This came a week after the crisis brewing at Yes Bank – India’s fourth largest private bank – came to a dramatic head, with the RBI placing it under moratorium, superseding its board of directors and limiting regular withdrawals to Rs 50,000 a month. According to RBI, the bank’s financial situation had seriously deteriorated due to governance issues and practices in recent years.

As part of the Cabinet-approved reconstruction scheme for Yes Bank, public lender State Bank of India, along with several private banks, have announced that they will invest considerable amounts into the crisis-hit lender.

Here’s all you need to know in 10 points:

• State Bank of India (SBI) has announced an investment of Rs 7,250 crore in Yes Bank through the acquisition of 725 crore shares. The Congress has alleged that SBI will provide this capital by cutting interest rates for over 44.51 crore of their own account-holders.
• Uday Kotak-led Kotak Mahindra Bank has said it will infuse equity capital of Rs 500 crore into Yes Bank under RBI's bailout plan.
• Axis Bank has said it will invest up to Rs 600 crore in Yes Bank to acquire 60 crore shares as part of the reconstruction plan for the cash-strapped peer lender.
• Mortgage lender HDFC Ltd has said it will invest Rs 1,000 crore into Yes Bank for an equity stake as per the RBI-mandated reconstruction scheme for the troubled lender.
• ICICI Bank has also said it will invest Rs 1,000 crore in Yes Bank as part of the RBI's reconstruction plan. The decision was taken at ICICI Bank's board meeting held on Thursday.
• The banks are buying Yes Bank stock at the price of Rs 10 per share. The face value or par value (stated in the bank’s charter) of each share is Rs 2, while the remaining Rs 8 is premium.
• According to both ICICI and HDFC, their investment is likely to result in each of them holding an excess of 5 percent stake in Yes Bank. SBI is likely to hold an excess of 35 percent stake.

• Shares of Yes Bank on Friday rose by 2 percent after SBI’s infusion was announced. SBI shares gained nearly 14 percent.
• "The decision to provide a reconstruction scheme keeps at its core the protection of depositors' interest, keeps at its core providing stability to Yes Bank and also keeps at its core keeping a stable financial environment, banking system," Finance Minister Nirmala Sitharaman said.
• Despite pleas from the Reserve Bank against it, the Maharashtra government on Friday issued a circular asking all its departments to shift their accounts to nationalised banks.

(With inputs from PTI)