SBI to buy 725 crore shares of Yes Bank at Rs.10 each; shareholding to remain up to 49%

On Thursday, the State Bank of India declared that it would purchase 725 crore shares of Yes Bank at Rs. 10 per share subject to regulatory approvals. It made this disclosure to the stock exchange under Regulation 30 of SEBI (Listing Obligations and Disclosures Requirements) Regulations 2015.

The SBI’s Executive Committee of Central Board approved this crucial decision. At the same time, the SBI reiterated that its shareholding in Yes Bank would remain within the 49% paid-up capital of Yes Bank, as prescribed by the RBI’s draft reconstruction scheme. This development comes nearly a week after the RBI imposed a 30-day moratorium on Yes Bank, capping the withdrawal limit for customers to Rs.50,000.

Read: SBI To Pick Up 49% Stake In Crisis-ridden Yes Bank; Initial Investment Will Be Rs.2,450 Cr

The moratorium imposed on Yes Bank

On March 5, the RBI imposed a moratorium on Yes Bank, superseding its Board of Directors. In the meantime, former Chief Financial Officer of SBI Prashant Kumar was appointed as its administrator. The RBI cited Yes Bank's “inability to raise capital to address potential loan losses” and “serious governance issues” as some of the reasons for taking action.

A day later, the RBI unveiled a draft reconstruction scheme of Yes Bank in the public domain. As per the scheme, State Bank of India expressed its willingness to invest in Yes Bank and participate in the reconstruction process. Moreover, the RBI invited suggestions and comments from the members of the public.  

Read: SBI Cuts Interest Rate On Savings Accounts To 3 Pc; Removes Minimum Balance Requirement

Draft scheme unveiled by RBI

Under the ‘Yes Bank Ltd. Reconstruction Scheme, 2020’, the authorised capital of the reconstructed bank shall be altered to Rs.5,000 crore. The investor bank shall hold 49% shareholding in the reconstructed bank. Moreover, it cannot reduce its holding below 26% before the completion of three years of infusion of the capital. 

Once the scheme comes into operation, the RBI-appointed administrator will be replaced by a new Board on which the investor bank will have two nominee directors. Importantly, the draft states that no customer will be entitled to get any compensation from the reconstructed bank on account of the changes occurred by virtue of the scheme. On the other hand, all employees will continue in service with the same terms and services at least for a period of one year.  

Read: Chidambaram Contradicts RBI Guv & SBI Chief; Advises 'SBI Should Take Over Yes Bank'

Read: SBI Chief PC Highlights: Rules Out Yes Bank-SBI Merger; 'deal Unaffected By ED Raids'