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Home >Industry >Banking >Yes Bank rescue: Cabinet approves reconstruction plan to protect depositors

Cabinet today clears draft resolution plan for capital-starved Yes Bank, said Finance Minister Nirmala Sitharaman. The State of Bank of India coming in at 49% stake in the Yes Bank, at the moment. The scheme is to primarily safeguard depositors and ensure the stability of the financial systems, Sitharaman said while briefing the media.

The moratorium on Yes Bank will be lifted within three days of notifying the scheme, Sitharaman said. A new board will have at least two director of SBI. The board will take over within 7 days of the issuance of notification.

Authorised capital has been raised from 1100 crore to 6200 crore of Yes Bank to accommodate immediate and subsequent raising of capital requirements, Finance Minister said.

Last week, the Reserve Bank of India submitted a draft scheme to revive crippled private sector lender. Under the central bank's revival scheme, SBI will have to buy 49% of Yes Bank and cannot reduce its holding below 26% before for the next three years.

Other investors also being invited to revive Yes Bank. There will be a lock-in period of three yrs of 75% of their investment, Sitharaman said.

As a part of central bank-mandated rescue plan, State Bank of India (SBI) approved an investment of 7,250 crore in Yes Bank Ltd. The executive committee of the board of largest lender approved the purchase of 725 crore shares of Yes Bank at a price of 10 a share, the state-run lender said.

SBI’s stake in Yes Bank will remain within 49% of the paid-up capital of the bank, the state-run lender told stock exchanges.

In its draft resolution plan, the banking regulator said that all deposits with Yes Bank will continue in the same manner and with the same terms and conditions. Authorised capital shall stand altered to 5,000 crore and number of equity shares will stand altered to 2400 crore of 2 each. The investor bank shall agree to invest in the equity of reconstructed Yes Bank to the extent that post infusion it holds 49% shareholding in the reconstructed bank at a price not less than 10 (face value of 2) and premium of 8.

On March 5, the RBI imposed a moratorium on Yes Bank, restricting withdrawals to 50,000 per depositor till April 3. The RBI also superseded the board and placed it under an administrator, Prashant Kumar who is a former deputy managing director and CFO of SBI.

After RBI's action, ED and CBI have arrested Yes Bank's co-founder and former CEO Rana Kapoor for alleged money laundering and corruption.

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