The Reserve Bank of India on Thursday imposed a moratorium on Yes Bank and superseded its board after the private-sector lender failed to raise capital from investors to cover for potential bad debts.
The central bank also capped withdrawal of deposits from Yes Bank to Rs 50,000 and appointed former State Bank of India chief financial officer Prashant Kumar as the lender’s administrator.
The RBI said in separate statements late in the evening that Yes Bank can't make new loans during the period of moratorium and that it is also putting in place a scheme for reconstruction or amalgamation for the lender. The regulator said it is taking these measures to “restore depositors’ confidence” in Yes Bank.
“The Reserve Bank has in consultation with [the] central government, superseded the board of directors of Yes Bank Ltd for a period of 30 days owing to serious deterioration in the financial position of the bank,” it said in a statement.
Yes Bank has been struggling for the past many months to raise funds from external investors in a bid to beef up its capital base in the wake of high bad loans. But it hasn’t been able to find any investors thus far. Yes Bank’s financial position has also worsened and it has experienced serious governance issues in recent years.
Earlier on Thursday, Bloomberg reported that the government had approved a plan for SBI to lead a consortium that would buy a stake in Yes Bank. SBI, India’s largest bank, had been authorized to select other members of the consortium, the report said. Shares of Yes Bank jumped as much as 29% after the report.
The RBI also said that it will explore and draw up a scheme for Yes Bank’s reconstruction or amalgamation, and implement the scheme before the 30-day moratorium ends.
Separately, SBI said in a late-night filing to stock exchanges on Thursday that its board had given in-principle approval to "explore investment opportunity" in Yes Bank. It didn't elaborate.
