India's largest bank stock sees the sharpest fall in over 7 years — investors want to say 'no' to Yes Bank

The dip came after rumours of SBI buying stake in Yes Bank hit the market yesterday — an indication that investors want to say no to the bailout. Sources told ET that SBI and the Life Insurance Corporation of India (LIC) would be buying 49% stake in the private bank at ₹2 per share — amounting to a total of ₹490 crore.

The apex bank said, “No such negotiations or events took place,” in a statement filed with the Securities and Exchange Board of India (SEBI) late last night, March 5. It clarified that even though the matter was discussed at the meeting of the Central Board of the Bank of March 5 and an “in-principle approval” was authorised by the board.

Today, March 6, SBI Chairman Rajneesh Kumar told reported that the interests of stakeholders, especially depositers will be protected. "It's a bank specific issue, not a sectoral one," he said after meeting finance ministry officials.

Buying stake in Yes Bank

Rumours of SBI buying stake in Yes Bank led to the private bank’s share zooming up during afternoon trade yesterday by as much as 27%. However, after the RBI issued its directive last night, which limits withdrawals to ₹50,000, Yes Bank’s shares fell by 25% today morning, March 6, as markets opened.

Some have questioned why the RBI dragged their feet to save Yes Bank when their financial troubles were already on the horizon during their second-quarter earnings. Deposits fell by 7% and the bank reported a loss of $85 million. It even asked for a 45-day extension from SEBI to post its third-quarter earnings as it went hunting for funds to the tune of $2 billion.

“Since a bank and market-led revival is a preferred option over a regulatory restructuring, the Reserve Bank made all efforts to facilitate such a process and gave adequate opportunity to the bank’s management to draw up a credible revival plan, which did not materialise,” said India’s top bank in a statement.

Adding to the pressure on markets, US President Donald Trump said that the coronavirus outbreak may have a possible effect on the US economy — and the news could not have come at a worse time.

The BSE Sensex is cracking under the pressure tumbling by nearly 3% to 37,497 in the morning — with 90% of the stocks trading in the red. The rupee also dipped to 73.90, the lowest its been since October 2018.

Investors reportedly lost nearly ₹4.5 lakh crore in a matter of 60 seconds, with the overall market value of BSE-listed companies falling to ₹143.17 lakh crore compared to ₹147.59 lakh crore in the previous session.

See also:
Yes Bank share price falls 25% after RBI limits withdrawals
SBI statement on proposed Yes Bank bailout is far from reassuring
RBI may have to bail out Yes Bank if it fails to raise $2 billion by March 14