The Reserve Bank of India announced a draft scheme of reconstruction of Yes Bank, less than 24 hours after the government imposed a moratorium on the bank till April 3. The moratorium placed a cap of Rs 50,000 per month on withdrawals.
A day after reports stated that the government asked the State Bank of India to pick up a stake in the beleaguered bank, the draft scheme stated that SBI “has expressed its willingness to make investment in Yes Bank Ltd. and participate in its reconstruction scheme.”
SBI has agreed to invest by way of equity and will then hold 49% shareholding in Yes Bank at a price not less than Rs 10. “The Investor bank shall not reduce its holding below 26% before completion of three years from the date of infusion of the capital,” the scheme states.
Yes Bank, under the reconstruction scheme, will now have authorised capital of Rs 5,000 crore and the number of equity shares will stand altered to 2,400 crore of Rs 2 per each. This aggregates to Rs 4,800 core.
As per the scheme, SBI will have two nominee directors appointed on the Board of the reconstructed Bank.
The draft scheme is now open to comments from the public, including shareholders, depositors and creditors on the draft scheme till March 9. It has also been sent to Yes Bank and State Bank of India for comment.
Addressing the media, Finance Minister Nirmala Sitharaman said that RBI has assured that the restructuring plan will come into play within 30 days before the moratorium periods ends.
SBI will also invest equity required to complete the reconstruction process, the FM added.
All the deposits with and liabilities of the Yes bank after reconstruction, will continue in the same manner and with the same terms and conditions, completely unaffected by the Scheme.
The scheme states that all employees of Yes Bank will continue in service. The Board of Directors of the reconstructed bank will “have the freedom to discontinue the services of the Key Managerial Personnel (KMPs) at any point of time after following the due procedure,” it said.
“The members of the Board so appointed shall continue in office for a period of one year, or until an alternate Board is constituted by Yes Bank Ltd. through the normal procedure laid down in its Memorandum and Articles of Association, whichever is later,” the scheme adds.
The offices and branches of the reconstructed bank shall continue to function in the same manner and at the same places they were functioning until now. This will not be affected by the reconstruction.
But post reconstruction, Yes Bank can open new offices and branches or close down existing offices or branches, in accordance with RBI’s norms, complying with the necessary terms and conditions.
Yes Bank resolution efforts are aimed at maintaining "stability and resilience" in the Indian financial sector and the difficulties will be overcome "very swiftly", RBI Governor Shaktikanta Das said on Friday.
The 30-day moratorium deadline is an "outer limit", he said, reiterating that the interests of depositors will be "fully protected".
The surprise move led to concerns being expressed on the way forward and its impact on the Indian financial system.
For the next month, Yes Bank will be led by the RBI-appointed administrator Prashant Kumar, an ex-chief financial officer of SBI.
Yes Bank's outstanding deposits stood at Rs 2.09 lakh crore as of September 2019, while it has reduced the size of assets by 6 per cent over the year to Rs 2.24 lakh crore for September.
The RBI had on Thursday hinted at there being excessive deposit withdrawals.
Despite repeated attempts, and discussion around a slew of names, none of Yes Bank’s fund-raising plans fructified, which led to RBI stepping in. The bank's stock plunged by over 56% to Rs 16.20 apiece on the BSE on Friday.
PTI inputs
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