The RBI assured Yes Bank depositors that their interest will be fully protected and that there is no need to panic. (Photo Credit: File Photo)
The State Bank of India (SBI) board has given an "in-principle" approval to invest in the capital-starved Yes Bank, according to PTI. The report said that the central board of SBI discussed the matter at a meeting on Thursday. The announcement came hours after Yes Bank was placed under a moratorium. The RBI superseded the Yes Bank board and capped deposit withdrawals at Rs 50,000 per account for a month for customers. Meanwhile, Yes Bank shares were down by over 25 per cent in opening trade on Friday.
Yes Bank depositors have been lining up outside ATMs across the country ever since the announcement. However, many faced problems including closed down machines and long queues. The problems were aggravated with difficulty in accessing the internet banking channel and app as depositers were not able to transfer funds online as well.
Maharashtra: People queue up outside Yes Bank's Fort Branch in Mumbai. The bank was placed under moratorium by Reserve Bank of India (RBI) and the withdrawal limit was capped at Rs 50,000, yesterday. pic.twitter.com/SEUglndblM— ANI (@ANI) March 6, 2020
"The matter in regard to Yes Bank was discussed at the meeting of the central board of bank on Thursday and an in-principle approval has been given by the board to explore investment opportunity in the bank," the SBI board informed the bourses late in the evening.
Under the moratorium, Yes Bank will not be able to grant or renew any loan or advance, make any investment, incur any liability or agree to disburse any payment. The Reserve Bank of India assured Yes Bank depositors that their interest will be fully protected and that there is no need to panic.
There is no provision to handle insolvencies of commercial banks, and the raft of actions come even as the government is working on the FRDI (financial resolution and deposit insurance) Bill. The actions come hours after reports of the government directing a consortium of largest lender SBI and life insurance behemoth LIC to bail out the bank emerged.
For the next month, Yes Bank will led by the RBI-appointed administrator Prashant Kumar, an ex-chief financial officer of SBI.
If successful, this will be the first major instance in many years where a private sector lender will be bailed out using public money, with the first instance being Global Trust Bank's amalgamation with Oriental Bank of Commerce in 2003, which was followed with IDBI Bank's takeover of United Western Bank in 2010.
The news of a bailout packaged had sent the Yes Bank stock soaring. It closed 25.77 per cent up at Rs 36.85 apiece on the BSE.
Earlier this year, SBI Chairman Rajnish Kumar had said the troubled bank will "not be allowed to fail". He had also suggested that rival Kotak Mahindra Bank is best suited to take over Yes Bank.
(With PTI Inputs)