Don’t panic, RBI tells Yes Bank depositors after ₹50,000 withdrawal cap

In a statement issued soon after the finance ministry order, the RBI issued a statement to “assure depositors of the bank that their interest will be fully protected and there is no need to panic”.

The Reserve Bank of India on Thursday told Yes Bank Ltd depositors that the central bank will fully protect their interest and there was no need for them to panic. The central bank’s statement came after the Finance Ministry notified a moratorium that stopped continuation of all actions against the banking company from 6 pm on Thursday to 3 April. During this period, depositors will only be able to withdraw ₹50,000.

Reserve Bank of India on Thursday told Yes Bank Ltd depositors that the central bank will fully protect their interest and there was no need for them to panic.(REUTERS)

In a statement issued soon after the finance ministry order, the RBI issued a statement to “assure depositors of the bank that their interest will be fully protected and there is no need to panic”.

The central bank said it will explore and draw up a scheme in the next few days for the bank’s reconstruction or amalgamation. The plan will be finalised well before the 30-day moratorium period ends “so that the depositors are not put to hardship for a long period of time”.

Yes Bank Ltd’s financial position has been declining steadily due to its inability to raise capital to address potential loan losses and resultant downgrades, triggering invocation of bond covenants by investors, and withdrawal of deposits.

The bank has also experienced serious governance issues and practices in recent years which have led to steady decline of the ban, the Reserve Bank of India said.

The central bank has superseded the bank’s board of directors for 30 days and appointed Prashant Kumar, the SBI’s ex-Deputy Managing Director and Chief Financial Officer as the administrator of the company.

In the order imposing the withdrawal cap of ₹50,000, the finance ministry barred Yes Bank from paying more than ₹50,000 to a customer over the next one month. This limit would remain the same irrespective of the number of the accounts that a person may hold.

“If a depositor maintains more than one account in the same capacity and in the same right, the total amount payable from all the accounts together shall not exceed the ( ₹50,000) limit,” the finance ministry order said.

In cases where a depositor also owes money to the bank in any manner - either as a borrower or surety - payments will be paid to such depositor only after adjusting the relevant borrowal accounts.