Finance Minister Nirmala Sitharaman yesterday said the government has asked the Reserve Bank of India to look into wrongs at the Yes Bank and assign individual responsibilities.
The bank was being under watch since 2017 and developments relating to it were being monitored on a day-to-day basis, she said. “Since 2017, the central bank noticed governance issues and weak regulatory compliance at Yes Bank, besides wrong asset classification and risky credit decisions.”
The bank took many risky credit decisions, and the RBI had advised change in management, the Minister said adding such decisions were taken in the interest of the bank’s health.
A new CEO was appointed in September 2018 and cleaning up of bank started and the investigative agencies too found irregularities, she said.
Sitharaman said the RBI has been asked to assess the causes of problems and identify the role played by individuals.
The restructuring scheme will be fully effective within 30 days, she said adding that the State Bank of India has expressed willingness to invest in Yes Bank.
The finance minister also said that employment and salary of Yes Bank employees has been assured for one year.
The draft reconstruction scheme for Yes Bank framed by the Reserve Bank of India stipulates that the investor bank, State Bank of India (SBI), will not reduce its stake below 26 per cent before completion of three years.
As per the scheme, called ‘Yes Bank Ltd. Reconstruction Scheme, 2020’, announced 24 hours after a moratorium was placed on the deposits of Yes Bank, the bank’s authorised capital will be altered to Rs50,000mn and the number of equity shares reduced to 24,000mn of face value Rs2 aggregating Rs48,000mn only.
SBI will hold 49% stake in the reconstructed bank. It will acquire this stake for not less than Rs10 with a face value of Rs2 and premium of Rs8.
SBI will not reduce its holding below 26% before completion of three years from the date of infusion of the capital.
The rationale given for the reconstruction scheme for Yes Bank is that the rapidly deteriorating financial position of Yes Bank Ltd relating to liquidity, capital and other critical parameters, and the absence of any credible plan for infusion of capital has necessitated Reserve Bank of India to take immediate action in public interest, particularly in the interest of the depositors. Accordingly, Yes Bank Ltd was placed under moratorium by an order notified by the Central government on March 5, 2020.
In terms of section 45 of the Banking Regulation Act, 1949 (10 of 1949), during the period of moratorium, the Reserve Bank of India may, if so considered necessary in public interest or in the interest of the depositors or to secure the management of the banking company, frame a scheme of reconstruction or amalgamation of the concerned banking company.
State Bank of India has expressed its willingness to make investment in Yes Bank Ltd. and participate in its reconstruction scheme. State Bank of India can appoint two nominee directors and RBI may appoint additional directors to the reconstructed bank’s board.
As per the draft scheme, no change has been made in the rights and liabilities of the reconstructed bank but its Additional Tier 1 capital has been written down completely and permanently.
She said that Essel, ILFS, DHFL and Vodafone were among the stressed corporates that Yes Bank had exposure to.
Hitting out at former Finance Minister P Chidambaram, Sitharaman said that the United Western Bank collapsed in 2006 under the “self-appointed competent doctors”.
“We are ensuring customers’ interests are protected. We can assure all depositors that their money is safe,” she said.
“I am closely monitoring every institution,” she added.
Meanwhile, rating agency Moody’s yesterday said the moratorium by RBI on Yes Bank is credit negative as it affects timely repayment of bank depositors and creditors.
Alka Anbarasu, vice president and 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.”
RBI on Thursday imposed a moratorium on the capital-starved Yes Bank, capping withdrawals at Rs50,000 per account and superseded the board of the private sector lender with immediate effect till April 4.
Yes Bank, for a month, will not be able to grant or renew any loan or advance, make any investment, incur any liability or agree to disburse any payment.
The board of SBI on Thursday gave an “in-principle” approval to invest in the bank, which has been struggling to execute a capital raising plan for the last six months.
Its core equity tier-I ratio had declined to 8.7% as of September.
The bank had also delayed its December quarter results.
The last lender to be placed under a similar action by the RBI was PMC Bank in September last year for fraudulent activities.
Any fiasco in the banking sector eventually takes a toll on the common man and the Yes Bank fiasco has been no different, as people across the country have had to stand in long queues to withdraw their money.
Also, both net banking and the bank’s mobile app services were down.
Moreover, ATMs in several places have run out of cash, adding to the despair.
The Reserve Bank of India (RBI) on Thursday capped withdrawal from Yes Bank at Rs50,000 and effected moratorium on Yes Bank from 6pm on Thursday to April 3.
Further, it is not just long queues and low-on-cash ATMs that is harrowing the depositors, even online banking and mobile app services of the private lender are not working.
Delhi-based Pranay Bhardwaj could neither log on to his mobile app nor netbanking site.
He fears he would not be able to withdraw cash for a longer period.
from Gulf Times https://ift.tt/2vJ1Q24
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