A day after the Reserve Bank of India (RBI) placed restrictions on Yes Bank, its shares have fallen sharply on the stock market. The central bank on Thursday replaced the board of the troubled private lender with immediate effect and placed it under a 30-day moratorium. Speaking on the decision, Chief Economic Advisor Krishnamurthy Subramanian on Friday said that the decision taken by the RBI is a "thoughtful decision"
Speaking to reporters, Subramanian said, "A decision has been taken to ensure that the money of the depositors is safe. The Reserve Bank has clearly said that the depositors' deposits are safe. I want to assure all depositors that their funds will remain safe, and there is no need to panic."
Speaking on the 30-day moratorium he added, "As I said, not only in India but globally it is a standard procedure, I gave the example of Global Trust Bank, so that is why this moratorium is needed. RBI has taken a thoughtful decision."
Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday explained that the decision to take over the commercial bank for 30 days was taken on a larger basis to ensure the resilience of Indian banking sector. He added that the RBI would put a scheme to revive Yes Bank in less than 30 days.
"The decision has been taken at a larger level - not just at an individual entity level. It is at a larger level to ensure the resilience of the Indian banking sector. Let me assure you that the Indian banking sector continues to be safe and sound and challenges ahead of us – RBI is ready to deal with it effectively, as it is the responsibility of RBI as the Central Bank of India," he said at a Mumbai event.
"30 days is the outer limit of our process, but it will be done sooner than that. You will see that the RBI will put a scheme in place to revive Yes bank," he said adding "Our decision is an investor-based one and one must give us enough time to the bank management and they did try over several months. But when we found that it was not working out, RBI decided to intervene."
On Thursday, RBI appointed former SBI CFO Prashant Kumar as administrator for Yes Bank and imposed a moratorium on the troubled lender capping its withdrawals at Rs 50,000, for a period of 30 days. The RBI stated that the decision was taken to a serious deterioration in the financial position of the bank and has been done to restore depositors' confidence in the bank.