Assuring the panicking depositors of Yes Bank, 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. Explaining the timing of the decision, he stated that the RBI had allowed the bank management to revive its bank for the past months, but had to intervene when the bank could not do so.
"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. Yes Bank has also cancelled all fund withdrawal requests made by clients to their YES bank accounts and its stocks tumbled by 10%.
The SBI board has given "in-principle" approval to invest in the Yes Bank after the bank was placed in moratorium. The government has asked SBI and LIC to bail out the private lender which has stressed assets of Rs 45,000-50,000 crore, by forming a consortium of banks and picking up a stake - 24.5 percent stake each. JP Morgan on March 5 slashed the target price on shares of YES Bank to Re 1, in view of the stake sale.
Yes Bank started facing a crisis as it accumulated many bad loans in 2018. Moreover, when RBI refused to extend the term of founder Rana Kapoor as chief executive in 2018, its management was severely hit with his successor Ravneet Gill managing to raise only one round of funds through a share sale to institutional investors. In a bid to revive the bank, Gill has been in talks over the past 18 months with equity investors but could not come up with a concrete investment plan.