RBI replaces the board of the Bank Yes, the withdrawal of ceilings in Rs 50,000
RBI has appointed the Deputy Managing Director and Chief Financial Officer of the State Bank of India, Prashant Kumar, as administrator of the bank. Although the central bank has said the moratorium will last 30 days, sources said a plan involving SBI is in process. This includes the possibility of a revival by a consortium of new owners led by OSI, including the Life Insurance Corporation.
In a statement, RBI said it had given the bank management enough time to try to raise capital and find a “market-driven solution” to their problems. However, the bank could not find investors that would support a reactivation package.
“In the absence of a credible revival plan, and in the public interest and in the interest of the depositors of the bank, he had no alternative but to ask the central government to impose a moratorium … effective as of today,” the RBI said.
According to government sources, the administration led by Ravneet Gill continued to press the deadline to raise capital, which led RBI to finally act. “RBI had to intervene because it did not want to create systemic problems,” said a senior official.
While depositors will be protected up to Rs 5 lakh, thanks to the coverage of deposit insurance and the proposed reconstruction / merger that RBI is working on, shareholders are likely to lose. They include LIC, which owns an 8% stake, and mutual funds such as Nippon Life, Franklin Templeton and UTI Asset Management.
JP Morgan said in a report: “We believe that forced rescue investors probably want the bank to be acquired at a value close to zero to take into account the risks associated with the stress book and the possible loss of deposits.”
Yes, the Bank’s problems first came to light in 2017 when RBI said its bad loans were more than the bank had disclosed. After an inspection of the bank, RBI denied an extension to its founder and chief executive Kapoor.
In later years, new default values came to light. Some of the big delinquents to whom the bank had advanced funds included IL&FS, the Anil Ambani group, CG Power, Cox & Kings, Café Coffee Day, the Essel group, Essar Power, Cemento Vardaraj, Radius Developers and the Mantri Group.
Kapoor, an industry veteran, had launched Yes in 2003 and soon expanded it. Bank sources said the bank was engaged in high-risk loans, providing advances to those who could not raise funds elsewhere.
RBI began working on a moratorium a few days ago after it became clear that Yes Bank could not implement a “credible proposal” for capital infusion.