Depositors of troubled Yes Bank may heave a sigh of relief. The government has notified the reconstruction scheme for capital-starved lender Yes Bank as per which the restrictions imposed in withdrawals will end in three working days and a new board of directors will take charge seven days after that.
Yes Bank had struggled to raise much needed capital for months. Finally, on March 5, the Reserve Bank of India (RBI) superseded the bank’s board and placed it under a moratorium; deposit withdrawals were restricted till April 3. With a reconstruction plan now approved by the cabinet, the restrictions will be lifted well before that.
“The order of moratorium on the reconstructed bank issued by the government of India, dated March 5, 2020, shall cease to have effect on the third working day at 18:00 hours from the date of commencement of this scheme,” the government said in its notification. The Yes Bank Reconstruction Scheme, 2020 comes into force from March 13 (Friday).
After taking control of the bank, the RBI had appointed Prashant Kumar, former chief financial officer at State Bank of India, as the administrator for Yes Bank. Kumar has now been appointed as MD and CEO. Sunil Mehta, former non-executive chairman of state-owned Punjab National Bank will be the non-executive chairman of Yes Bank. Mahesh Krishnamurthy and Atul Bheda will be the non-executive directors.
Furthermore, the investor bank shall nominate two officers as directors and RBI may also appoint one or more people as additional directors, according to the notification.
Under the reconstruction scheme, SBI, will hold up to 49 per cent in Yes Bank. The country’s largest lender had on Thursday approved an investment of Rs 7,250 crore (725 crore shares at Rs 10 each). The country’s largest mortgage lender Housing Development Finance Corp and ICICI Bank will invest Rs 1,000 crore.
Private sector lenders Axis Bank and Kotak Mahindra Bank will also be picking up Yes Bank equity worth Rs 600 crore and Rs 500 crore respectively. The investor bank and the investors shall be treated as public shareholders for a period of five years.
As per the bank’s shareholding pattern, co-promoter Madhu Kapur held 6.87 per cent stake in Yes Bank at the end of December 2019 quarter. Another promoter group entity Mags Finvest held 1.46 per cent stake and Yes Capital had 900 shares. Among other major non-promoter shareholders, Life Insurance Corp of India (LIC) through its various schemes held 8.06 per cent of Yes Bank and HDFC had 2.27 per cent.
Foreign portfolio investors (FPI) held as much as 15.17 per cent in Yes Bank and domestic mutual funds held 5.09 per cent. Under the reconstruction scheme, there will be no change in the offices and branch network of Yes Bank. Also, all employees of the bank will remain in service with the same remuneration and on the same terms and conditions of service.
All the deposits and liabilities of Yes Bank shall also continue in the same manner as per the reconstruction scheme.