Yes Bank moratorium to be lifted Wednesday
3 min read 14 Mar 2020, 10:28 AM ISTAfter the moratorium goes, the new board, including two directors from SBI, will be set up within seven daysRBI had imposed a moratorium on the bank, limiting cash withdrawals to ₹50,000 per person
PremiumNEW DELHI: The moratorium imposed on Yes Bank will be lifted, effective 18 March, 6 pm, the government said notifying the State Bank of India-backed rescue plan for the private bank. The reconstruction scheme for the cash-strapped private lender is effective 13 March.
After the moratorium goes, the new board, including two directors from SBI, will be set up within seven days. Thereafter, Reserve Bank of India (RBI)-appointed administrator, former SBI chief financial officer Prashant Kumar, will vacate the office.
According to the scheme, Kumar will be the Chief Executive Officer (CEO) and Managing Director of Yes Bank. Former non-executive chairman of Punjab National Bank Sunil Mehta will be its non-executive chairman. Mahesh Krishnamurthy and Atul Bheda would also be non-executive directors. The RBI can also appoint one or more official as additional director.
Finance minister Nirmala Sitharaman on Friday said that Union Cabinet has approved the reconstruction scheme for Yes Bank that was worked out to protect the interest of depositors and to enable a stable financial environment. Owing to its deteriorating financial position pertaining to insufficient liquidity and capital and no concrete plan for capital infusion, the finance ministry put the lender under a moratorium.
According to the scheme, Yes Bank’s authorized capital will be raised to ₹6,200 crore from ₹1,100 crore, after investors put in money. The number of equity shares will be 30 billion at Rs2 a piece. The authorised preference share capital will continue to be ₹200 crore.
Besides, the reconstructed bank will have to allot its equity shares within two working days after the scheme is notified. “The investor (SBI) and other investors, shall invest in the reconstructed bank and the reconstructed bank shall allot equity shares of the reconstructed bank, at a price of ₹10 only with face value of ₹2 only and premium of ₹8 only, subject to the condition that post infusion of equity capital, the equity shareholding of the investor bank shall not be less than 26% and not more than 49% of the total equity shares of the reconstructed bank," the scheme said.
Sitharaman said SBI--the anchor investor-- will invest up to 49% of equity in Yes Bank as part of the RBI-supervised ‘Yes Bank Ltd Reconstruction Scheme, 2020’. On Thursday, SBI informed the exchanges that its board had approved a proposal to invest ₹7,250 crore in Yes Bank by purchasing 7,250 million shares at ₹10 apiece. Other investors have also shown interest in participating in Yes Bank’s reconstruction scheme. On Friday, Mint reported that HDFC and ICICI Bank will infuse ₹1,000 crore each, Axis Bank ₹600 crore and Kotak Mahindra Bank (KMB) Ltd ₹500 crore into Yes Bank.
On Saturday, Bandhan Bank said it will invest ₹300 crore in Yes Bank.
Other investors will be subject to a three-year lock-in period for 75% of their investment, while for SBI its equity shareholding cannot be reduced to less than 26% for three years, according to the reconstruction scheme.
According to the proposed scheme, the voting rights of all investors except SBI will be capped at 9% each.
“The investor bank and the investors shall be treated as ‘public shareholders’ of the reconstructed bank for a period of five years from the date of allotment of shares to them under all applicable laws," it said.
On 5 March, RBI took over the board of cash-starved Yes Bank to restore depositors’ confidence in the lender and prevent it from failing. It imposed a moratorium on the bank, limiting cash withdrawals to ₹50,000 per person across all accounts for 30 days. The central bank also superseded the board of the private sector lender.
“During the period of moratorium, the Reserve Bank of India has considered it necessary in the public interest and in the interest of the depositors and also to secure the management of the banking company, to prepare a scheme for the reconstruction of the concerned banking company," the scheme said.
