RBI Likely To Provide Liquidity Support To Yes Bank
The RBI will take up securities worth Rs 10,000 crore and extend support worth Rs 8,000-9,000 crore as part of the plan.
The Reserve Bank of India is likely to provide a special liquidity line to beleaguered private sector lender Yes Bank Ltd., according to a person with direct knowledge of the development.
The RBI will take up securities worth Rs 10,000 crore and extend support worth Rs 8,000-9,000 crore as part of the plan, the person said on the condition of anonymity as the details aren't public yet. The regulator will announce the support as early as this week in a bid to cover for any liquidity shortfall once the moratorium is lifted and depositors are able to withdraw their funds from their accounts.
The central bank is not allowed to directly lend to any bank under extant rules and thus will be extending this liquidity after applying adequate haircuts to the value of the securities which Yes Bank pledges, the person said.
Last week, the government placed Yes Bank under a month-long moratorium, and the RBI seized control and capped withdrawals at Rs 50,000 per customer citing poor financial position.
As of September, Yes Bank had deposits worth Rs 2.09 lakh crore, with current and savings accounts contributing 30.8 percent, according to the lender's presentation to analysts. Current account deposits stood at Rs 24,900 crore and savings accounts at Rs 39,600 crore.
In an interview with BloombergQuint, Prashant Kumar, the administrator appointed by the RBI assured Yes Bank's depositors that they would not face any risk of losing their funds as the banking regulator and SBI have both assured liquidity support. According to Kumar, Yes Bank is currently working toward lifting the moratorium much ahead of the April 3 deadline.
The RBI is also in the process of finalising a rescue plan for Yes Bank and will be ready to announce it by Wednesday, the person quoted earlier said. On Friday, the banking regulator released a draft reconstruction plan under which State Bank of India will be allowed to take up a 49 percent equity stake in Yes Bank by infusing Rs 2,450 crore. India's largest lender will then be expected to maintain its stake at 26 percent for a period of three years, once other investors start investing in the private bank and its equity gets diluted further.
SBI Chairman Rajnish Kumar on Saturday told reporters that the bank's total investment in Yes Bank will not exceed Rs 10,000 crore. SBI's legal and investment teams are in the process of completing their due diligence on the Yes Bank balance sheet and will be submitting a list of recommendations to the RBI on Monday. Once the suggestions are submitted, the banking regulator will draft the final plan.
Meanwhile, the Enforcement Directorate questioned Yes Bank co-founder and former Chief Executive Officer Rana Kapoor and later arrested him under money laundering charges.