In a sudden move, Reserve Bank of India (RBI) on 5th March 2020 placed the crisis-hit Yes Bank under a moratorium. Like in the cases of PMC and DHFL, the RBI has superseded the Yes Bank board for a period of 30 days and placed some stiff restrictions on the bank. It has imposed the following restrictions:
- The withdrawal limit for all transactions has been capped at Rs 50,000 per account for a month till April 3
- The Rs 50,000 cap is the aggregate limit across all your accounts with the bank — savings, deposits or current accounts.
- The bank will not be able to grant or renew any loan or advance, make any investment, incur any liability or agree to disburse any payment.
Grounds of Exception from Yes Bank restriction
Exceptions will be made in a few cases and ‘competent authority’ will decide on these exceptions. The amounts in these cases cannot be more than Rs 5 lakh or the amount of money that is in the accounts (whichever is less). Grounds of exception that will be considered are:
- Medical treatment for account holder or dependants
- Higher education costs for account holder or dependants in India or abroad
- Marriage expenses
- ‘Unavoidable emergencies’
RBI has said that interest will be paid on deposits at the bank.
Why RBI put such restrictions?
- Like most banks in India, Yes Bank faces a crisis of non-performing assets, i.e. loans that have either gone bad or where repayments have been delayed for too long. Partly due to this, Yes Bank’s capital eroded. For the last several months, the bank has been hunting for cash in the form of fresh investment. The hunt, however, came up empty.
- Apart from this, Yes Bank also faced governance issues. According to a Business Today report, Yes Bank under-reported NPAs to the tune of Rs 3,277 crore in 2018-19. The report also says that the bank’s management misled the RBI by indicating to the central bank that talks with investors on pumping in equity were likely to be successful.
- All these factors led the RBI to conclude that there was no “credible revival plan” and so “in public interest and the interest of the bank’s depositors” there was “no alternative” but to place the bank under moratorium. The RBI said it was concerned about the financial situation at Yes Bank, which has been battling a bad loan book and has been unable to raise money.
- On the other hand, the RBI released a draft plan to revive the crisis-hit bank. According to the draft plan, the state-run State Bank of India will invest money in Yes Bank and own 49 percent of its shareholding.
Net-banking down, ATMs non-functional
Long queues of customers outside Yes Bank’s ATMs and bank branches have been reported across major cities. Depositors have also been heard complaining that although the RBI has allowed withdrawals of up to Rs 50,000, online transfers through internet banking haven’t been working.
Account-holders have reported non-functional ATMs and net banking and fund transfer facilities.
Because it one of the most digital-friendly banks, it was the biggest bank for fintech companies. Startups such as PhonePe, which were heavily dependent on YES Bank for banking, escrow accounts, payment gateways, etc. have been paralyzed.
PhonePe is the largest payment partner for YES Bank. “We sincerely regret the long outage. Our partner bank (YES Bank) was placed under moratorium by the RBI. The entire team’s been working all night to get services back up asap (sic). We hope to be live in a few hours,” PhonePe Founder and CEO Sameer Nigam tweeted.
What happens to Yes Bank Customers?
As of now, the situation is not quite clear but RBI has unveiled a draft revival plan aimed at pumping fresh money into Yes Bank. However, as things stand, Yes Bank customers cannot withdraw from than Rs 50,000 from their accounts, except in certain specific situations.
Yesterday, i.e. on 7th March 2020, customers faced hurdles withdrawing money from ATMs or accessing internet banking due to apparent network issues at Yes Bank. As of Friday evening, there was no clarity on the status of these services and when they would be fully restored.
Are the deposits of the customers in Yes Bank safe?
Yes, of course, the money is safe. The government sent out a message of assurance with Finance Minister Nirmala Sitharaman saying that the immediate priority was to ensure that Yes Bank customers are able to withdraw money within the Rs 50,000 limit.
- On the other hand, SBI Chairman Rajnish Kumar said that there is no need to panic for depositors of Yes Bank as RBI Governor has assured them in this regard in a press statement. He told “RBI Governor has very clearly said in a press statement that there is no need to panic. All depositors’ funds are protected. We gave the information of in-principle approval of SBI’s investment to the stock exchange,”
- Chief Economic Advisor Krishnamurthy Subramanian said that there is no need for depositors to panic and assured all depositors’ funds will remain safe.
- RBI Governor Shaktikanta Das said that there will be a swift action from the central bank to put in place a scheme to revive Yes Bank. “The 30 days which we have given is the outer limit. You will see very swift action from the RBI to put in place a scheme to revive. A market-based resolution of the problem, a bank-laid, investor-laid resolution of the problem is always preferable,” he said.
Will RBI restrictions impact your loan EMI disbursement, SIPs, insurance premium payments?
As the limit will apply on all transactions, you may face issues if the amount to be deducted towards these payments is higher than Rs 50,000. However, if it’s less than Rs 50,000, it will be honored.
What will happen to Yes Bank salary account customers?
You might need to figure out alternate ways to get money if you have a salary account with Yes Bank and require more than Rs 50,000.
How RBI restriction on Yes Bank will hit Mutual Fund investors?
- Several mutual funds have stopped accepting redemption requests from their schemes into Yes Bank accounts to protect investors.
- You need to take steps so that your future income through mutual fund redemptions or dividends don’t get blocked.
- If you have a Yes Bank account tied to your mutual fund investment, you can give a change of account request along with a canceled cheque at a nearby office of CAMS
What is the insurance cover limit for Yes Bank’s depositors?
In case the bank gets dissolved, the insurance limit for depositors will be Rs 5 lakh per depositor across all accounts, including locker
Any revival plan in the store?
- Finance Minister Nirmala Sitharaman said that the State Bank of India had expressed interest in investing in Yes Bank. Sitharaman’s comments came just as the Reserve Bank of India unveiled a draft revival plan.
- Under the draft plan, SBI would invest money in Yes Bank and own 49 percent of the restructured bank. Yes Bank’s market value would also be revised to Rs 5,000 crore with 2,400 crore equity shares with a value of Rs 2 each.
- The capital infusion would happen with SBI paying at least Rs 10 per share and not the face value of Rs 2. According to a back-of-the-envelope calculation, at Rs 10 per share, SBI would have to fork out Rs 11,760 crore to own 49 percent of the restructured Yes Bank.
- The other measures of the RBI’s draft plan include a new board and an assurance that Yes Bank employees would work under the same salary and terms of employment as before. “Key managerial personnel”, however, could be let go by the new board if it so wishes.
- The new board of directors will include a CEO who would also be the Managing Director. Other Board of Directors would be a Non-Executive Chairman and two Non-Executive Directors.
Stay tuned with Registration SEVA for any further updates in this regard