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Yes Bank: SBI will establish the 49% acquisition in Yes Bank even when the ED Kapoor raid promoter

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MUMBAI / NEW DELHI: One day after the Reserve Bank of India replaced the Yes Bank board promoted by Rana Kapoor and limited cash withdrawals at Rs 50,000 (Rs 5 lakh in exceptional situations) and the State Bank of India said it was “exploring an investment opportunity” in Yes Bank, the RBI came out Friday with a “draft reconstruction scheme” under which SBI will bring Rs 2.5 billion rupees for a 49% stake in the sector bank Private in crisis.

The scheme proposes the total reimbursement of all deposits, the dilution of capital and the cancellation of Rs 10,800 million rupees of additional level one (AT-1) bonds.

In an attempt to reassure depositors and markets, RBI Governor Shaktikanta Das said that although a 30-day moratorium had been imposed, the resolution would be much faster. RBI has invited comments and suggestions on the scheme until March 9, after which it will have a final view.

Government sources said the RBI decided not to merge Yes Bank with SBI because it would have put pressure on the government-owned bank’s balance sheet. The government and the RBI hope that SBI financing and the “strong brand” of Yes Bank would help change the bank. The reconstruction scheme foresees increasing the authorized capital of the multiple bank to Rs 5,000 crore from Rs 800 crore.

While the face of the shares is Rs 2, SBI will pay Rs 10 per share, which is a premium of Rs 8, and will not reduce its share below 26% for three years. Government sources expect SBI to obtain a higher price than the entrance when it sells part of its participation. SBI’s investment in new shares will proportionally dilute the holdings of existing shareholders.

While some analysts expressed surprise at the scheme, as it placed the interest of shareholders above that of AT-1 bondholders, RBI and government sources said this was in line with the Basel rules and the terms of Bond issuance AT-1 bonds are acquired by institutional investors, mutual funds and insurance companies.

The reconstruction scheme has been proposed under Section 45 of the Banking Regulation Act of 1949, which gives RBI enormous powers to deal with a bank that replaces any market regulator rule.

On Friday, Moody’s rating agency downgraded the bank’s long-term deposit rating from Caa1 from B2 after the RBI moratorium, which the agency says is an event of default.

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