On March 5, the Reserve Bank of India (RBI) imposed a month-long moratorium on YES Bank. It has restricted the withdrawals that customers can make from their YES Bank accounts to Rs 50,000 until April 3, 2020.
This ‘moratorium’ means that a customer can withdraw a maximum of Rs 50,000 in this period from his/her savings or current or any other deposit accounts. If you have more than one deposit account with YES Bank, then the moratorium will apply cumulatively on all your accounts. There’s a small relief in cases of emergencies. The RBI has said that you could withdraw a higher amount of up to Rs 5 lakh for medical emergencies, payment towards higher education or for marriage.
The moratorium comes in the wake of deteriorating financials of the bank. Till the RBI figures out a restructuring plan (the State Bank of India said in an exchange filing on March 5 that its board is exploring an investment in the Bank), depositors of the bank will face some difficulties in accessing their funds. The RBI, however, has reassured the depositors that a solution will soon be worked out and that there is no reason to panic.
So, what do you do if you have an account with Yes Bank? Or, have equated monthly installments (EMI), SIP investments, insurance premiums or utility bills to pay, the funds for which must go out of your Yes bank account? Or, if you receive your salary, redemption or dividend proceeds in the same account? Read on to get a clearer picture.
Inform your lender, employer and fund house
If you are repaying a loan to some other bank or non-banking finance company (NBFC), immediately inform your lender about the development. Your EMIs won’t stop even in such cases. But, typically, your lender can give you some leeway in terms of extending your deadlines for a couple of months. If you are hard-pressed for funds, or in case a chunk of your savings lie in Yes Bank, you may have to withdraw from your investments to tide over the crisis temporarily. Harshvardhan Roongta, Principal Financial Planner at Roongta Securities says, “During the moratorium period your YES Bank account will not be debited. So, immediately register fresh ECS mandates with a different bank account for such payments to be cleared.” Have a chat with your lender.
In case you have a loan repayment to be made to YES Bank itself – from your salary account with Yes Bank – then the bank will debit your bank account first towards the EMI liabilities. The remaining amount will then be available to you for withdrawals, subject to the overall cap imposed. However, if the amount in your YES Bank account is insufficient, then you are liable to pay the balance to the bank.
If you have linked your Yes Bank accounts to pay for your systematic investment plans (SIPs) in MFs, or to receive redemption or dividend proceeds from mutual funds, then may be in a fix. But help is at hand. Many fund houses have come forward on social media and said that they will help customers to change their bank mandates speedily to ensure investors’ flow of money is not much disturbed. Radhika Gupta, chief executive officer of Edelweiss Asset Management and Nilesh Shah, managing director of Kotak Mahindra AMC gave out email addresses on twitter last night for investors to get in touch with, in case they have accounts with Yes Bank. Expect other fund houses too to offer similar measures. But you need to get in touch with them soon, especially if you had initiated a redemption request in the last 72 hours.
Zerodha, one of India’s largest brokerages, has also assured its customers that it will not deposit redemption requests into customers’ Yes Bank accounts even if they had been initiated recently. This is a good and proactive step that such fund houses and brokerages have taken and comes as a relief. But investors must get in touch with their fund houses and brokerages soon to get their other bank accounts registered.
Meanwhile, the registrar and transfer agents (RTAs) of mutual fund houses will screen the database of investors for YES Bank account holders and pay-out won’t be released for them till customers link a fresh account or the Central Government lifts its restrictions.
“Asset management companies (AMCs) will request investors having YES Bank accounts to link any other bank to credit the redemption amount and to continue investments in mutual fund schemes,” says Roongta.
Being the last month of the financial year, several investors might be planning to invest for tax-saving purposes. Roongta says, “If you have been investing in Equity Linked Savings Schemes (ELSS) for more than three years, then redeem from existing ELSS schemes and re-invest the amount in ELSS to claim tax benefit for this financial year.” This redemption and re-investment should be done only after updating other bank account details with RTAs and mutual fund houses.
Inform your employer and get your salary account changed to another bank to ensure you get your salary on time. Talk to your employer if your salary account is with Yes Bank.
Will my deposit be insured?
The deposits with all banks are guaranteed under the Deposit Insurance and Credit Guarantee Corporation (DICGC) to the tune of Rs 5 lakh, including interest, if your bank fails.. However, this insurance kicks in only if your bank fails. This is not the case with Yes Bank, as the RBI has superseded the bank’s board and has initiated a restructuring plan. Kalpesh Ashar, founder, Full Circle Financial Planners and Advisors says, “These measures by the Central Government and the Reserve Bank of India are precautionary actions to safeguard customers’ savings with the bank.”
Just because the Central Government has imposed restrictions on withdrawals from YES Bank, there is no need to panic. The moratorium has been imposed for a month and there’s enough indication that a solution will be worked out in the interim. “The Central Government and RBI won’t let the bank go into bankruptcy. They are planning to merge with another bank,” says Ashar.