Yes Bank crisis: Union Cabinet approves reconstruction scheme proposed by RBI

Yes Bank crisis: Union Cabinet approves reconstruction scheme proposed by RBI

Union Cabinet has approved the reconstruction of crisis-hit Yes Bank as per the scheme proposed by Reserve Bank of India.

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Union Cabinet has approved the reconstruction of crisis-hit Yes Bank as per the scheme proposed by Reserve Bank of India, Finance Minister Nirmala Sitharaman told media on Friday.

Giving details about the scheme, Nirmala Sitharaman said State Bank of India will invest for 49 per cent equity in Yes Bank and other investors are also being invited.

There will be a three year lock-in period for all the investors, she said. However, the lock-in period for SBI would be only for the 26 per cent of the shareholding. The authorised capital of the lender has been increased to Rs 6,200 crore from Rs 1,100 crore, the finance minister said.

Nirmala Sitharaman said the scheme has been approved with the objective of protecting the interest of depositors and providing stability to Yes Bank as well as to the entire financial system.

The moratorium on the bank will be lifted within three days of notification of the reconstruction scheme, while its board will be in place in seven days, she said.

On Thursday, SBI said it will invest Rs 7,250 crore in Yes Bank, which is much higher than Rs 2,450 crore it had planned initially for 49 per cent stake in the private sector lender that began operations in 2004.

On March 5, he RBI imposed a moratorium on Yes Bank, restricting withdrawals to Rs 50,000 per depositor till April 3. During the moratorium period, Yes Bank is not to grant or renew any loan or advance, make any investment, incur any liability or agree to disburse any payment.

Troubles at new-generation private sector started brewing up ever since the Reserve Bank denied an extension to its co-founder Rana Kapoor — who now is in the custody of the Enforcement Directorate on charges of financial mismanagement and money-laundering — to continue as MD and CEO in September 2018, and had asked the lender to find a new successor.

However, the bank’s financial health is not sound as it has failed to raise enough capital under the new leadership of Ravneet Singh Gill, who took charge as the managing director and CEO from March last year.

Yes Bank’s administrator, Prashant Kumar, a former SBI executive, had on last Friday assured customers that the moratorium period could end by this weekend.

Source- India Today.

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