- The Cabinet has approved the reconstruction scheme for Yes Bank, as proposed by the RBI.
- Aside from SBI, the Reserve Bank of India is also in talks with other private investors to rescue the bank.
- Private investors who get shares of Yes Bank cannot have to retain 75% of their stake for three years.
The Cabinet has approved the reconstruction scheme for Yes Bank, as proposed by the Reserve Bank of India (RBI). "It will protect depositor's interest, revive the troubled bank, and stabilise India's financial system,"
Finance Minister Nirmala Sitharaman said.
Separately, ICICI Bank said that the board has approved for an equity investment of up to ₹10 billion in equity shares of Yes Bank. The rumour mill in the market was expecting more investment in Yes Bank from the state-owned Life Insurance Corporation of India (LIC). However, the Finance Minister clarified that the RBI is in talks with other private investors to rescue the bank
The authorised capital of Yes Bank has been raised manifold to ₹6200 crore from the current ₹1,100 crore current. The limit on withdrawals by depositors will be lifted on the third working day after the official notification of the cabinet decision, at 6 pm. The Reserve Bank of India placed Yes Bank under moratorium and capped the withdrawal by depositors at ₹50,000 till April 3.
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The State Bank of India (SBI) will buy 725 crore shares in Yes Bank at ₹10 per share, which adds up to an investment of ₹7,250 crore, giving the country's largest bank a 49% stake in the troubled private bank. The SBI will not reduce its holding below 26% for at least three years from the date of investment. Those private investors who get shares of Yes Bank cannot sell 75% of their stake for three years. "A new board, having at least 2 directors of SBI, will take over within 7 days of the issuance of notification," Sitharaman added.
The decision has come a day before the much-awaited quarterly earnings, which have been delayed by a month, from Yes Bank. The numbers are expected to reveal the depth of the rot in the bank which has gone from being one of the country's top banks to embattled one, neck-deep in bad loans, and one with a history of scandals under its earlier promoter Rana Kapoor who was recently forced out by the RBI.
With the money of millions of Indian depositors stuck at the bank, the government and other authorities have come together to rescue the bank and stop it further wrecking India's financial system.
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Yes Bank crisis and its domino effect on bonds, mutual funds and other corporate defaultsFinance Minister assures employment and salary at Yes Bank at least for one year