The Yes Bank has been in troubled water for quite some with their stock market share were continuously dipping, with no solution at hand. On Thursday, 5th March their shares dropped down to an all-time low, sliding over 25% and closing stock of ₹38.85.
Reserve Bank of India on Thursday took the decision of superseding the bank’s current board led by Rana Kapoor. Additionally RBI also placed Yes Bank under a moratorium, which refers to a restriction imposed on the withdrawal amount to be not more than ₹50,000. However, there will also be a special withdrawal amount up to ₹50 Lakh for people in emergency situations such as medical expenses or marriage.
The moratorium will be applied for a 30 day time, and within this period, Yes Bank is prohibited from granting new loans, or renewal of loans, in short, restricted from acquiring any additional liability. However, it will not suspend services like salary transfer, legal expenses, and taxes. There is also a plan in progress involving the State Bank of India (SBI) that might play an important role by buying a stake of the bank during the moratorium period.
After Thursday’s downfall, on Friday again, Yes Bank’s shares crashed nearly 40%, as Reserve Bank of India (RBI) disclosed their decision coming into effect from Thursday 6 pm onward. BSE Index also revealed Yes Bank stock to be falling by almost 44.91% amounting up to ₹20.30.
The decision by Reserve Bank of India (RBI) is said to be taken in public interest and all of its consumers. It is believed that there was no other way around apart from placing the moratorium under section 45 of the Banking Regulation Act, 1949.
The reason behind this decision is because of the steady decline that the bank has undergone. This decline is closely associated with potential loan losses, withdrawals, investors invocating their covenants, resultant downgrade. RBI will also be drawing up a scheme directed towards Yes Bank’s reconstruction of possible amalgamation.
RBI has been in contact with the bank’s management, with the purpose of strengthening its balance sheet and improvise liquidity options. On the other hand, Yes Bank has been in talks with various private equity firms hoping for a capital infusion.