The Reserve Bank of India (RBI) on March 5 said it is superseding the board of troubled private sector lender Yes Bank with immediate effect.
Former State Bank of India CFO Prashant Kumar has been appointed the administrator.
"This has been done to quickly restore depositors' confidence in the bank, including by putting in place a scheme for reconstruction or amalgamation," the RBI said in a statement.
The central bank has also imposed a moratorium on the private lender till April 3, 2020. Withdrawals from the bank have been capped at Rs 50,000 per depositor.
The move by RBI comes nearly six months after it did the same with Mumbai-based Punjab and Maharashtra Cooperative (PMC) Bank.
Yes Bank has been grappling with mounting bad loans and has been struggling to raise fresh capital.
Rana Kapoor to Moneycontrol:
I personally believe it's a good clinical move and at least there is a methodology in making sure that the bank has a safe landing and the process and the timelines are well defined.
If there is an incremental preferential issue or a QIP or even for that matter, a rights issue on the back of SBI anchoring the bank going forward … I would reckon that the flood gates for all sources of capital — domestic and overseas — will open up. The institution itself has always attracted all forms of capital in the past via QIP and bonds.
PTI
Moody's Investors Service on March 6 downgraded Yes Bank Ltd's rating following RBI imposing a 30-day moratorium that prevents the lender from making payment to its creditors.
"The ratings remain under review, with the direction uncertain," Moody's said downgrading Yes Bank Ltd's long-term foreign currency issuer rating to Caa3 from B2.
Moody's has also downgraded the bank's long-term foreign and local currency bank deposit ratings.
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Official to PTI:
About Rs 191 crore of Nagpur University are stuck with the crisis-hit private lender Yes Bank.
Odisha Minister Pratap Jena on Rs 592 crore deposit of Jagannath Temple in Yes Bank:
Fix deposits of the temple in the bank will mature on March 16 and March 29. After that, temple admin will withdraw money and put it in a nationalised bank. Bar on money withdrawal is for saving accounts only.
Suman Chowdhury - President Ratings at Acuité Ratings & Research Limited:
The announcement of a moratorium on Yes Bank and the release of a draft scheme of reconstruction strongly validates the inherent risk in Additional Tier-1 Bonds or Innovative Perpetual Debt Instruments (IPDI) which form part of the Tier-1 Capital of a bank. This is for the first time in the history of the Indian Banking sector that a bank’s T1 bonds is being written down at the ‘point of non-viability’ (PONV) i.e. the investors have to take a hit on both principal and the balance interest payments.
Acuité Ratings understands that the outstanding additional T1 (AT1) bonds issued under Basel III norms for Yes Bank stands at Rs. 10,800 Cr. Clearly, the investors in such AT1 bonds, mainly comprising mutual funds and banks’ treasuries will need to take a significant hit due to this development. Acuité also believes that this will limit the market for AT1 bonds in India only to issuances by a few large public sector banks and further, the pricing will see increased differential with that of Tier-2 bonds to reflect the differential risk.
Gaurav Dua, Sr VP, Head – Capital Market Strategy & Investments, Sharekhan by BNP Paribas:
Another bank bites the dust. This time its Yes Bank – one of the large private sector banks. RBI has stepped in and leading state-owned institutions are patching up a bailout plan for the bank and more importantly, safeguard the interest of depositors. However, the already weak sentiments have been dented further. The series of accidents in the Indian financial sector sends out a very poor message to the foreign investors.
Fitch Ratings:
The central bank's takeover of Yes Bank appears intended to restore depositor confidence. However, we believe that there is a risk that the RBI's move could backfire if it prompts depositors to shift their money to institutions that are perceived to be safer. This could pose liquidity challenges, particularly for smaller private banks with weaker franchises or more limited access to support from parent entities.
The speed of the authorities' resolution of the situation at Yes Bank is likely to be an important factor in determining the reaction of depositors and financial markets. Absent a formal resolution framework for financial institutions in India, the onus ultimately falls on the regulator to orchestrate the process under powers provided by the RBI Act, which outlines voluntary or forced mergers as the available options.
VK Vijaykumar, Chief Investment Strategist at Geojit Financial Services:
The Yes Bank problem has been a market concern for many months now. RBI preferred, and rightly so, an internal resolution of the problem through capital infusion. But now the central bank has acted since the bank management failed to raise capital. A quick resolution can be expected. There is no systemic issue or contagion consequences. No need to panic.
Moody's downgrades Yes Bank's long-term issuer Ratings. Yes Bank ratings remain under review, direction uncertain. (CNBC-TV18)
Satish Gupta, MD and CEO of Paytm Payments Bank Ltd:
Safety and security of our users' money are of utmost importance to us. We have stopped all transactions to Yes bank accounts so that the money doesn’t get blocked. We are also requesting users to change their primary bank account to some other bank. However, these restrictions are temporary in nature till the time we get more clarity on the situation.
Paytm Payments Bank Ltd (PPBL) on March 6 announced that they are restricting transaction settlements, including UPI, into Yes Bank accounts to safeguard their users’ money. Post the RBI moratorium on withdrawal of money from Yes Bank, PPBL has taken this step to ensure that its users’ money doesn’t get stuck in their Yes Bank accounts where they are unable to move their money out.
Prashant Kumar, RBI-appointed Yes Bank Administrator:
The current moratorium has been brought into effect keeping the depositors’ interest in mind and towards restoring their confidence. A solution is being worked upon to revive the Bank well before the moratorium period of thirty days ends. The Bank is also taking necessary steps to ensure seamless transactions for the customers. We assure the depositors that their money is safe and there is absolutely no reason to panic. Look forward to continued support from the depositors.
Yes Bank statement:
This is with reference to the press release by the Reserve Bank of India dated March 5, 2020 and Ministry of Finance Notification issued on March 5, 2020, which made an Order of Moratorium in respect of Yes Bank limited till April 3, 2020.
With reference to the above, the withdrawal limit for depositors has been capped at Rs 50,000 as an aggregate limit for the entire moratorium period, wherein customers will be allowed to withdraw a total of Rs 50,000 from their accounts.
The Bank remains available to address all queries and clarifications. Depositors are requested to get in touch with the nearest branch for any assistance
RBI draft Scheme of Reconstruction:
New board to be constituted, SBI to have 2 nominee directors. RBI mayappoint additional directors to new board of reconstructed bank.
RBI draft Scheme of Reconstruction:
Authorised capital of Yes Bank shall stand altered to Rs 5,000 crore and number of equity shares will stand altered to 2,400 crore of Rs 2 each.
FM Sitharaman:
We can assure that all depositors that their money is safe, shall ensure this shall be resolved speedily and the bank is restructured.
FM Sitharaman:
I see the opposition very keen to point a finger at us. Not here to continue carrying the stories of legacy. Yes, the Indian banking system has had severe challenges, thanks to the way in which the govt between 2004-14 handled the matters.The so-called, self-appointed doctors are saying this, they are saying Yes Bank is no bank.
They were the same people who handled the United Western Bank, which was almost on the verge of collapsing in 2006, forcefully merged with IDBI. And today, if i have problems restoring some good health of IDBI, i am giving a pointed example of how self-appointed competent doctors had handled United Western's merger with IDBI. IDBI went down and United Western was already challenged.
Global Trust Bank, July 2004, was merged with Oriental Bank of Commerce.
Ganesh Bank of Kurundwar was merged with a private bank, Federal Bank in January 2006. In all 3, you immediately merged and washed your hands off.
How many people were held accountable for the challenges faced by all such banks?
FM Sitharaman:
Had said earlier, will not allow any institution to fall off the cliff. The exposure of Yes Bank to some of the very stressed corporates has been since before 2014. Anil Ambani group, Essel Group, DHFL, IL&FS, Vodafone are some of those very stressed corporates to which Yes Bank has been exposed, and this has been since before 2014.
FM Sitharaman:
After the administrator does his job, a new boardwill be put in place. Deposits and liabilities will continue unaffected as before. Employment and salary assured at least for 1 year.
FM Sitharaman:
Even as we speak, the RBI has put out a scheme for restructuring; expect scheme to be effective within 30 days of the moratorium. SBI has expressed willingness to invest in Yes Bank.
FM Sitharaman:
Have asked RBI to find out and assess where the problem lies. Also, asked them to clearly identify the role played by individuals in the problem. I want the RBI to follow due process of law to find out what led to this magnitude of the problem in Yes bank
FM Sitharaman:
In Nov 2019, it was clear there was no hopes for the bank to get any money.
FM Sitharaman:
In May and June 2019, fines levied on the bank. It was only in September 2019, that the earlier promoter's stake in the bank was completely sold. All this while, genuine attempts were made to get equity into the bank, but nothing materialised.
FM Sitharaman:
Rs 1 crore fine was levied on the bank in March 2019. SEBI also began investigation into the bank from September 2019.
FM Sitharaman:
Investigative agencies saw malpractices of some executives at Yes Bank.
FM Sitharaman:
Since 2017, RBI has been continuously monitoring the Yes Bank situation.
JUST IN:
RBI announces draft Scheme of Reconstruction for Yes Bank
How does it impact your debt fund investments?
Mutual funds schemes holding bonds issued by Yes Bank are expected to markthem down and may create segregated portfolios in caserating agencies downgrade the rating of such instruments to below-investment-grade (BBB).
Many investors have shown interest in buying stake in Yes Bank, says govt official
Multiple investors have shown interest to pick up stake in Yes Bank, a senior government official told Moneycontrol.
"Government may soon receive a resolution plan for Yes Bank and it may be finalised by the Reserve Bank of India in a day or two," the official said.
Yes Bank likely to retain its identity, SBI to maintain arm’s length post bailout
Prashant Kumar, former Deputy Managing Director and CFO of State Bank of India (SBI), was a serving officer of the bank till March 5 when he was asked to resign and take up the role of an RBI-appointed administrator inYes Bank, a source told Moneycontrol.
Read the full story
Finance Minister Nirmala Sitharaman assuredYes Bankcustomers about the safety of their deposits.
"I am constantly in contact with the RBI (Reserve Bank of India) and the steps being taken are in the interest of depositors, bank and the economy," she said.
Transactions on Edenred's co-branded meal card not valid for now
With RBI imposing restriction onYes Bank, transactions done through the co-branded meal card of the private lenderand Edenred won't be valid for the time being, the meal voucher company said.
Finance Minister Nirmala Sitharaman will brief the media at 4.30 pm, a spokesperson told Moneycontrol.
Govt source to Moneycontrol:
Government may receive Yes Bank resolution plan from RBI soon. Yes bank resolution plan may be finalised by the central bank in a day or two. Multiple investors have shown interest to pick up Yes Bank stake
Andrew Holland, CEO of Avendus Capital, to CNBC-TV18:
Believe RBI will quickly sort the Yes Bank issue.
People wait outside a Yes Bank branch in Mumbai to withdraw their money. (Image: Reuters)
JUST IN:
RBI's resolution plan on Yes Bank likely today, CNBC-TV18 reports.
To safeguard Yes Bank investors AMCs swing into action
Following the 30-day moratorium placed onYes Bank, asset management companies (AMCs) have asked their clients, who have bank accounts with the troubled lender, to furnish details of alternate accounts for receiving redemption payouts.
Nirmala Sitharaman:
I have monitored the situation for a couple of months along with the Reserve Bank.
Finance Minister Nirmala Sitharaman:
Constantly in touch with RBI over Yes Bank. RBI Governor has assured of a quick resolution. Can't give any details of the resolution plan now.
Aditya Puri to CNBC-TV18:
Moratorium of a large bank is a matter of concern but ensures Depositors are protected. Believe that restructuring of Yes Bank will happen much before expected.
Aditya Puri, HDFC Bank Managing Director, to CNBC-TV18:
Govt andRBI have acted in the best way to structure asolution for Yes Bank.
People wait outside a Yes Bank branch in Ahmedabad to withdraw their money. (Image: Reuters)
SBI Chairman Rajnish Kumar:
Interest of Yes Bank depositors will be protected. There is no need to panic.It's a bank-specific issue, not a sectoral one.
