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Centre clears Yes Bank rescue plan

Cash withdrawal restrictions and other moratorium conditions would be lifted within 3 days of the notification of the bailout plan
Nirmala Sitharaman in New Delhi on Friday.
Nirmala Sitharaman in New Delhi on Friday.
Picture by Prem Singh

Our Special Correspondent   |   New Delhi   |   Published 13.03.20, 07:13 PM

The Union cabinet on Friday has approved the reconstruction scheme of Yes Bank proposed by the RBI even as it raised the authorised share capital of the bank to Rs 6,200 crore against the apex bank’s proposal to cap it at Rs 5,000 crore.

Finance minister Nirmala Sitharaman said the cash withdrawal restrictions and other moratorium conditions on the private sector lender would be lifted within three days of the notification of the SBI-led bailout plan.

“After the notification of the scheme, within three (working) days the moratorium will be lifted and within seven days, a new board will be constituted,” Sitharaman said, adding that the notification will be issued “very soon”. She said the State Bank of India will invest up to 49 per cent equity in Yes Bank and other investors are being asked to infuse funds.

Hours after the cabinet approved the restructuring scheme, private sector lenders ICICI Bank, Kotak Mahindra Bank and Axis Bank, and mortgage lender HDFC came to the bank’s rescue.

The SBI on Thursday said it would invest Rs 7,250 crore in equities, while ICICI Bank, HDFC, Axis Bank and Kotak Mahindra Bank would together invest Rs 3,100 crore in the bank’s shares, taking the total commitment to Rs 10,350 crore, so far.

There will be two directors from the SBI on the new board of Yes Bank. The administrator will vacate the office within seven days of the notification and a new board will take charge. The finance minister said there would be a three year lock-in period for all the investors. However, the lock-in period for SBI would be only for 26 per cent shareholding. It would be 75 per cent in the case of other investors.

Tier-I capital query

Sitharaman declined to comment on a query regarding the write-off of AT1 (additional tier-1) bonds, saying the “matter is in court…would not like to comment”.

The RBI’s proposed writedown of the additional tier-1 (AT-) bonds issued by Yes Bank would cause a loss of around Rs 10,800 crore to their holders

Meanwhile, the CBI has booked Yes Bank founder Rana Kapoor and his wife Bindu for allegedly obtaining a Rs 307-crore bribe through the purchase of a bungalow in Delhi from a realty firm at half the market price and facilitating around Rs 1,900 crore bank loans to it in return.

Maharashtra ignores advisory

Despite pleas from the Reserve Bank against it, the Maharashtra government on Friday issued a circular asking all its departments to shift their accounts to nationalised banks, according to PTI.

In the wake of reports of such moves being mulled by some states, the RBI had on Thursday written to state governments not to shift away from private sector lenders, flagging its concerns on financial stability. The fiasco at Yes Bank, a private sector lender, has led some state governments to think on these lines.

“All the government offices, public undertakings, corporations are advised to ensure that all their banking- related businesses should be undertaken with nationalised banks itself,” a government resolution from the state finance department said.

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