RBI assures deposits in banks safe after Yes Bank crisis

RBI’s moratorium on the crisis-ridden Yes Bank limiting withdrawals to Rs 50,000 for a month had triggered panic among account holders who lined up before branches and ATMs to withdraw their money

The Reserve Bank of India has dismissed concerns about safety of bank deposits in the wake of the Yes Bank financial crunch crisis and issued an assurance on Sunday that all deposits were safe since RBI monitors all the banks as per its mandate.

The banking regulator said sections of media had made a flawed analysis triggering concern about solvency of banks based on their market capitalization figures.

“Concern has been raised in certain sections of media about the safety of deposits of certain banks. This concern is based on analysis which is flawed,” a tweet from RBI said on Sunday.

The bank further clarified that solvency of banks is internationally based on “Capital to Risk Weighted Assets (CRAR) and not on market cap”.

“RBI closely monitors all the banks and hereby assures all depositors that there is no such concern of safety of their deposits in any bank,” said the following tweet from the central bank.

RBI’s moratorium on the crisis-ridden Yes Bank limiting withdrawals to Rs 50,000 for a month had triggered panic among account holders who lined up before branches and ATMs to withdraw their money.

RBI Governor later assured account holders that their money was safe with Yes Bank and the intervention to resolve the crisis has been done at a “large” level ruling out a piecemeal solution.

Government also stepped in to assure depositors and said that Yes Bank account holders in need of exigency fund could also follow the RBI guidelines and draw up to Rs 5 lakh in the designated period.

RBI had to place a similar moratorium on Punjab and Maharashtra Co-operative (PMC) Bank last year that had raised questions about the safety of ordinary citizen’s money in bank deposits.

The PMC crisis has forced the government to consider amendments to the Banking Regulation Act to bring cooperative banks under effective RBI supervision.