Yes Bank deposits safe: FM

Tribune News Service

New Delhi, March 6

The government today assured depositors of Yes Bank that the curbs on withdrawals may not last long as the Reserve Bank of India will bring in a reconstruction plan within the moratorium period of one month with the SBI as one of the equity holders.

Edit: Trouble at Yes Bank

The RBI has currently imposed withdrawal restrictions of Rs 50,000 in a month.

Finance Minister Nirmala Sitharaman said bank’s deposit and liabilities would remain unaffected as before and the restrictions on withdrawals would be temporary. Once the administrator cleaned up the books, he would exit and a new board would be brought in. The staff had been assured employment and salary for at least one year.

However, there was no word on the inconvenience caused to people with a single account in the bank as they would be unable to receive redemptions from mutual funds, etc.

“We will not allow any institution to fall off the cliff… I want to assure you that,” Sitharaman said, while mounting an attack on the previous UPA government for “laxity”, which led to the Yes Bank’s collapse. “While the interests of the depositors are completely safeguarded, equally we want the RBI to ensure that the due process of law is followed to find out who led to this problem in Yes Bank,” she asserted. According to the Finance Minister, Yes Bank’s exposure to some extremely stressed corporates such as Essel, Anil Ambani group, DHFL, Vodafone and IL&FS was before 2014.

“I say this as the Opposition is pointing a finger at us. The Indian banking system has had severe crises, thanks to the UPA government that functioned between 2004 and 2014. I have reasons to put the blame on that regime,” she said.

It was three years back that the RBI uncovered a culture of weak compliance, wrong asset classification and risky credit decisions, which were reported to the Union Finance Ministry. A new CEO was appointed the next year. After a white knight from Hong Kong himself got into legal troubles, the writing was on the wall. The Bank President quit in October last year followed by the audit committee chief in January 2020. “That is the time we actively engaged with the RBI,” she said.

Sitharaman trained her guns on “the so-called self-appointed competent doctors” who are blaming the government for the collapse of Yes Bank. The United Western Bank, on the verge of collapse in 2006, was forcefully merged with the IDBI. “Their solution led to IDBI Bank also losing its moorings,” she recalled. Global Trust Bank was merged with the Oriental Bank of Commerce in July 2004. “How many people did the UPA govt take action against,” she asked.

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Beginning of Chronology

2018 September: RBI inspects books, asks Yes Bank for change in leadership

2018 November: Yes Bank

chief, several directors quit

2019 March: New CEO appointed

2019 August: Kapoor sells stake, new CFO appointed

2019 OctNov: More top brass quits, Kapoor asks for time

2020 January: More board members quit

2020 March: RBI and govt take Yes Bank affairs in their hands

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Rescue strategy

• Authorised capital Rs50,000 cr
• All deposits, existing contracts to be honoured
• New board to replace RBI Administrator
• Two board members from SBI, one from RBI

What led to the fall

• More corporate customers than retail clients
• Most loans advanced to corporates facing bankruptcy

Share price drops

• Shares of Yes Bank fell as much as 85% early on Friday, erasing more than $1 bn of market value

SBI to take 49% stake

• SBI will take 49% stake in the troubled lender. Yes Bank has been trying to raise Rs100 bn for months