RBI caps withdrawals from Yes Bank at ₹50000 per account-panic spreads among deposit holders
The government on Thursday imposed a withdrawal limit of INR 50,000 for depositors of Yes Bank. According to an official notification issued by the finance ministry on Thursday evening, the cap will stay in effect till 3 April 2020.
Meanwhile, the Reserve Bank of India, in a separate release, stated that the bank’s board has been superseded for a period of 30 days due to serious deterioration in the financial position of the Bank”. The regulatory actions, undertaken by the RBI and the government, came hours after finance ministry sources confirmed that SBI was directed to bail out the troubled bank.
Yes Bank has been struggling to raise capital for the past few months and needs the money to bolster ratios that stand just above a regulatory minimum. The bank postponed its December quarter results citing fundraising talks and is set to announce earnings by March 14. It has been struggling to raise capital for the past few months which is at the root of all its problems.
The financial position of Yes Bank Ltd. has undergone a steady decline largely due to the inability of the bank to raise capital to address potential loan losses and resultant downgrades, investors’ issues and withdrawal of deposits. “The bank has also experienced serious governance issues and practices in recent years which have led to a steady decline of the bank” the release noted.
The Reserve Bank has been in constant engagement with the bank’s management to find ways to strengthen its balance sheet and liquidity.
Keeping with the concerns of the commoners, the limit on withdrawal is stipulated with a few exemptions in cases like medical emergency, higher education, marriage, and unavoidable emergency, the notification mentioned.
“This has been done to quickly restore depositors’ confidence in the bank” the RBI release stated.
Meanwhile, PhonePe, one of the country’s largest digital payment platforms, dependent on Yes Bank to process its transactions has expressed concern and assured its customers that the digital services will be restored.
It could not operate and honor its customer’s transactions as its digital payments are tied to the cash-strapped Yes Bank. Expressing regret the app’s chief executive Sameer Nigam tweeted “the entire team’s been working all night to get services back up as soon as possible.”
Yes Bank’s net banking facilities have not been operational and its other fintech operators too who rely on it for their transactions are also down.
After RBI’s stringent step of a month-long moratorium on Yes Bank citing the adverse financial position of the bank, public rushing to ATMs has complained that the ATMs have run out of cash.
“Banks are considered trustworthy by the public but from now onwards people will start losing their trust. RBI takes such action whenever it wants. What is the crime of common men? Bank did not inform us anything,” said Mr. Nand Kumar, a customer. Yes bank has conspired and misleads the people.”
In the light of a similar kind of situation that occurred with PMC in the recent past, the RBI move has triggered off panic and fear that public money may not be returned at all.
The reserve bank assured Yes Bank depositors that their interest will be fully protected and there is no cause for panic. The moratorium will also not affect the banks’ ability to pay salaries to its employees.
For the next month, Yes Bank will be led by Prashant Kumar, an ex-chief financial officer of SBI the RBI-appointed administrator.