'Your money is safe': Nirmala Sitharaman steps in to boost Yes Bank depositors' confidence as RBI prepares revival plan

The RBI said the State Bank of India (SBI) has expressed willingness to invest in Yes Bank.

FP Staff March 08, 2020 11:44:22 IST
'Your money is safe': Nirmala Sitharaman steps in to boost Yes Bank depositors' confidence as RBI prepares revival plan
  • Nirmala Sitharaman said that RBI has been asked to assess causes of problems and identify the role played by individuals

  • RBI unveiled reconstruction scheme for crisis-hit Yes Bank and said said SBI expressed willingness to invest in private lender

  • Shares of Yes Bank came under massive selling pressure on Friday, plunging 56% at close, after the lender was placed under a 30-day moratorium

Even as panic-stricken depositors thronged the cash-strapped Yes Bank since Thursday evening after the govt capped withdrawls at Rs 50,000, Finance Minister Nirmala Sitharaman stepped in to allay the concerns of the customers of the private lender and assured that their interest will be protected and that their money is safe.

"We are ensuring that the customers interests are protected," Sitharaman said while addressing a press conference in Delhi on Friday afternoon.

"We can assure all depositors that their money is safe," she added. "I am closely monitoring every institution which requires that kind of monitoring along with RBI," the finance minister said adding that the Reserve Bank of India (RBI) has been asked to assess the causes of problems and identify the role played by individuals.

The government, she said, wants the RBI to ensure that due process of law is followed with a sense of urgency.

Since 2017, the central bank noticed governance issues and weak regulatory compliance at Yes Bank, besides wrong asset classification and risky credit decisions, she said.

Your money is safe Nirmala Sitharaman steps in to boost Yes Bank depositors confidence as RBI prepares revival plan

Representational image. News18

On finding risky credit decisions, the RBI advised change in management, she added.

Sitharaman said that State Bank of India has expressed willingness to invest in Yes Bank and that the restructuring scheme will be fully effective within 30 days. She also said that that employment and salary of Yes Bank employees have been assured for one year.

She said that the Anil Ambani Group, Essel, ILFS, DHFL and Vodafone were among the stressed corporates that Yes Bank had exposure to.

Retorting to former finance minister P Chidambaram's attack on the government over the Yes Bank crisis, Sitharaman said that the collapse of United Western Bank in 2006 had taken place under the "self-appointed competent doctors".

Chidambaram had termed Yes Bank crisis as a completely "regulatory failure" and said there is no need to panic as the Reserve Bank of India placed restrictions on the bank. "It shows completely regulatory failure and I wonder if this is the end or there will be more in the line. Yet the government keeps absolute silence. PMC bank depositors are agitating every day before RBI offices in Mumbai. But the government did not respond," Chidambaram told reporters in Delhi.

Earlier in the day, Sitharaman assured cash-starved Yes Bank depositors that their money is safe and the RBI is working on an early resolution of the issue.

“I'm in continuous interaction with the RBI. The central bank is fully seized of the matter and has assured they will give a quick resolution. I want to assure every depositor that their money shall be safe. Their monies are safe,” Sitharaman told reporters in Delhi.

RBI announces reconstruction scheme

Meanwhile, the RBI unveiled reconstruction scheme for the crisis-ridden Yes Bank.

The RBI said the State Bank of India (SBI) has expressed willingness to invest in Yes Bank.

Your money is safe Nirmala Sitharaman steps in to boost Yes Bank depositors confidence as RBI prepares revival plan

In the draft 'Yes Bank Reconstruction Scheme, 2020', the RBI also said the strategic investor bank will have to pick up 49 percent stake and it cannot reduce holding to below 26 percent before three years from the date of capital infusion.

From the appointed date, the authorised capital of the private sector bank would stand altered to Rs 5,000 crore and number of equity shares to 2,400 crore having face value of Rs 2 each.

"The investor bank shall agree to invest in the equity of the reconstructed bank to the extent that post infusion it holds 49 percent shareholding in the reconstructed bank at a price not less than Rs 10 (Face value of Rs 2) and premium of Rs 8," said the draft on which comments from stakeholders have been invited till 9 March.

It further said SBI has "expressed its willingness" to make investment in Yes Bank and participate in its reconstruction scheme.

Shaktikanta Das assures of 'swift action' to revive Yes Bank

Yes Bank resolution efforts are aimed at maintaining "stability and resilience" in the Indian financial sector and the difficulties will be overcome "very swiftly", RBI Governor Shaktikanta Das said.

The 30-day moratorium deadline is an "outer limit", he said, reiterating that the interests of depositors will be "fully protected".

He also defended the timing of the move as "appropriate", saying Yes Bank was unable to come up with a solution despite being given time for an internal resolution.

"It (resolution) will be done very swiftly, it will be done very fast. Thirty days which we have given is the outer limit. You will see a very swift action from RBI to put in place a scheme to revive Yes Bank," Das told reporters in Mumbai.

Congress attacks govt for bank's collapse

Carrying out a scathing attack on the government, Congress leader Rahul Gandhi alleged that Prime Minister Narendra Modi and his "ideas" have destroyed the country's economy.

Flaying the BJP-led government over the moratorium placed on Yes Bank Gandhi tweeted: "No Yes Bank. Modi and his ideas have destroyed India's economy."

Senior Congress leader and former Union finance minister P Chidambaram also hit out at the government, saying its "ability to govern and regulate financial institutions stands exposed".

"BJP has been in power for six years. Their ability to govern and regulate financial institutions stands exposed. First, it was PMC Bank. Now it is YES Bank. Is the government concerned at all? Can it shirk its responsibility? Is there a third bank in the line?" the former finance minister said in a tweet.

He also wondered if the BJP-led government would confirm that YES Bank's loan book had grown under its watch from Rs 55,000 crore in FY 2014 to Rs 2,41,000 core in FY 2019.

Yes Bank shares plummet 56%

Shares of Yes Bank came under massive selling pressure on Friday, plunging 56 percent at close, after the cash-strapped lender was placed under a 30-day moratorium.

On the BSE, the scrip sank 56.04 percent to close at Rs 16.20 as investors deserted the counter. During the trade, it nosedived 84.93 percent to Rs 5.55 — its 52-week low.

It plummeted 54.89 percent to close at Rs 16.60 on the NSE. The company's market valuation also dropped from Rs 5,266.23 crore to Rs 4,131.77 crore on the BSE.

Moody's downgrades Yes Bank's ratings

Moody's Investors Service on Friday downgraded Yes Bank Ltd's rating following RBI imposing a 30-day moratorium that prevents the lender from making payment to its creditors.

"The ratings remain under review, with the direction uncertain," Moody's said, downgrading Yes Bank Ltd's long-term foreign currency issuer rating to CAA3 from B2. Moody's has also downgraded the bank's long-term foreign and local currency bank deposit ratings.

The downgrade "is a result of an event of default triggered by the RBI's moratorium, which prevents Yes Bank from making a full and timely payment to its senior creditors," the rating agency said in a statement.

"Despite the event of default, the CAA3 rating takes into account Moody's expectation that although recovery rates for the banks' senior creditors may be high given the close involvement of the Indian authorities and stated intention to resolve the bank quickly, the ultimate timing and form of eventual resolution remains uncertain.

Panicked customers throng Yes Bank branches 

Distress calls and long queues of customers were witnessed at various branches of Yes Bank after the RBI put a withdrawal limit of Rs 50,000 on Thursday. The cash-starved private sector lender has been placed under moratorium for one month.

On Thursday, the RBI in consultation with the Union government also superseded the bank's board of directors due to serious deterioration in the bank's financial position.

While customers complained about net banking not working, many resorted to microblogging site Twitter to express anguish that they were not able to withdraw money, posting screenshots that they were getting "connection error".

One of the customers wrote on Twitter that he wants to close his savings account but "how can I do it online?".

"We are facing intermittent issues in net banking. Request you to please try after some time," Yes Bank said in response to the tweet.

The Mumbai-headquartered private sector bank has also changed its toll-free phone banking number to 18001200 from 18002000.

However, it seems that the sense of crisis started brewing among the bank's customers even before the RBI's Thursday move as messags dating 3 and 4 March or before could be traced on its Twitter handle of customers complaining about banking issues. Some even left their personal mobile numbers, asking the bank to revert them back "ASAP".

Besides, the bank is also reported to be sending out messages to customers updating them about bank balances.

A customer of the bank said he faced no problem on Thursday night while transacting through his debit card at a fuel-refilling station.

— With PTI inputs

Updated Date:

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