Yes Bank Moratorium: Mutual Funds Swing Into Action To Safeguard Investors
Customers exit a Yes Bank Ltd. branch in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Yes Bank Moratorium: Mutual Funds Swing Into Action To Safeguard Investors


Asset management companies have asked their clients, who have bank accounts with Yes Bank Ltd., to furnish details of alternative accounts for receiving redemption payouts, following the 30-day moratorium placed on the troubled lender.

Redemption is the return of an investor’s principal on a fixed income security such as a bond, mutual fund or preferred stock.

Also read: Mutual Funds With Equity Exposure To Yes Bank

The Reserve Bank of India’s action came after the Rana Kapoor-promoted private lender failed to raise capital to address potential loan losses.

According to a government gazette, the bank’s depositors are allowed to withdraw cash up to Rs 50,000 from their accounts during the moratorium period.

The withdrawal limit, however, can be relaxed in case of medical emergencies, higher education and for expenses related to marriages, it said.

“If clients want to change their redemption bank account mandate from Yes Bank to any other bank they can send a request... We shall process the request for tomorrow’s redemptions so that their money isn’t blocked,” Kotak Mahindra Asset Management’s Managing Director Nilesh Shah said in a late night tweet on Thursday.

Edelweiss Asset Management also said it would ensure redemption payouts are not made to Yes Bank accounts from Friday and asked its clients to give an alternative account.

“We request investors who have redemption payouts pending to contact us... Advisers who have brokerage payouts pending should also contact us to change to alternative bank accounts,” Edelweiss Asset Management’s Chief Executive Officer Radhika Gupta tweeted.

Stock market brokerage firm Zerodha cancelled withdrawal requests made to Yes Bank. “We have cancelled all fund withdrawal requests made by clients to their Yes Bank accounts so that the money doesn’t get blocked. Please change, if your primary account is Yes Bank, to any other and withdrawal the funds,” Founder and Chief Executive Officer Nitin Kamath said in a tweet.

Also read: Here’s How Much Mutual Funds Are Exposed To Yes Bank Debt

The RBI in a statement said, “In the absence of a credible revival plan, and in public interest and the interest of Yes Bank’s depositors, it had no alternative but to apply to the government for imposing a 30-day moratorium effective March 5.” The banking regulator also appointed State Bank of India’s ex-deputy managing director and chief financial officer, Prashant Kumar as the administrator of the bank.

Late Thursday night, SBI informed exchanges that its board has given an in-principle approval to explore investment opportunity in Yes Bank.

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