Yes Bank crisis: RBI asks state govts not to move deposits out of private banks; says money is safe

The Reserve Bank of India (RBI) has asked state governments not to transfer their deposits out of private sector banks saying apprehensions about the safety of deposits in private lenders are highly misplaced

Press Trust of India March 12, 2020 17:04:21 IST
Yes Bank crisis: RBI asks state govts not to move deposits out of private banks; says money is safe
  • In a letter written to chief secretaries of all states, the central bank said moving deposits out of private sector banks could have implications for banking and financial sector stability

  • The letter came after reports suggested that some state governments have advised government bodies and other entities under their jurisdiction to transfer their funds held with private sector banks to public sector lenders

  • This follows the crisis at Yes Bank where the RBI has superseded the bank's board and placed restrictions on withdrawals

New Delhi: The Reserve Bank of India (RBI) has asked state governments not to transfer their deposits out of private sector banks saying apprehensions about the safety of deposits in private lenders are highly misplaced.

In a letter written to chief secretaries of all states, the central bank said moving deposits out of private sector banks could have implications for banking and financial sector stability.

The letter came after reports suggested that some state governments have advised government bodies and other entities under their jurisdiction to transfer their funds held with private sector banks to public sector lenders. This follows the crisis at Yes Bank where the RBI has superseded the bank's board and placed restrictions on withdrawals.

Yes Bank crisis RBI asks state govts not to move deposits out of private banks says money is safe

Representational image. Reuters.

"We strongly believe that such a move can have banking and financial sector stability implications," the RBI wrote. "We feel that apprehension on the safety of deposits in private sector banks is highly misplaced and will not be in the interest of stability of the financial system in general and the banking system in particular."

It requested state governments to reconsider any decision they might have taken in this regard or are in the process of taking such decision.

"The Reserve Bank has adequate powers to regulate and supervise the private sector banks and by using these powers, it has ensured that the depositors' money is entirely safe," the letter said.

The RBI said the resolution of weak private sector banks in the past has been done in a manner that the depositors are not put to loss.

"It is precisely with a view to retaining depositors' confidence in private sector banks and mitigating their hardship that, after the imposition of a moratorium on Yes Bank Ltd, the RBI has drawn up a draft scheme without any delay and we are making every effort to expedite the finalisation of the scheme," it added.

Updated Date:

also read

Old Oriental Bank and UBI cheque books to be discontinued from next month
India

Old Oriental Bank and UBI cheque books to be discontinued from next month

In the wake of PNB merging with OBC and UBI, customers with e-OBC and e-UNI cheque books will have to replace them with PNB cheque book with updated PNB IFSC and MICR

RBI removes UCO Bank from PCA watchlist after it signs commitment to comply with norms
India

RBI removes UCO Bank from PCA watchlist after it signs commitment to comply with norms

On a review of the performance of the UCO Bank, the Board for Financial Supervision found that the bank was not in breach of the PCA parameter

Over Rs 900 crore deposited in bank accounts of two boys in Bihar; village in shock
India

Over Rs 900 crore deposited in bank accounts of two boys in Bihar; village in shock

The huge sum of money got credited into the accounts of Guruchandra Vishwas and Asit Kumar and they both live in Pastiya village in Bagaura panchayat in Katihar district