RBI imposes moratorium on YES Bank:
Mumbai/New-Delhi: On Thursday, the Reserve Bank of India in a surprise move placed Yes Bank in a moratorium. A moratorium severely curtails banking and management operations. A notification to this regards has been published in the Gazette notification as well as a series of RBI notifications.
The apex bank has superseded the management saying that it will "quickly restore depositors’ confidence in the bank, including by putting in place a scheme for reconstruction or amalgamation."
The issue of bad-loans has turned severe at Yes Bank. Once reckoned a good bank to deal with, Yes Bank has fast turned into a No-Bank with a pile of NPAs. The bank refused to divulge its Q3 results even as it was scouting for fresh investments to the tune of $2 billion to keep-up with the NPAs. With the exit of promoter and former CEO Rana Kapoor, the bank's valuation has hit record-low on stock markets. The banking regulator has critically commented on the lack of confidence at a precarious position.
HOW DOES IT AFFECT CUSTOMERS?
The moratorium restricts Yes Bank from paying more than Rs 50,000 to depositors in general circumstances. RBI has clarified that the restriction on withdrawal is subject to conditions and it can be a general or special order to allow withdrawal of over Rs 50,000.
The apex bank also gave 4 cases for the bank to allow depositors to withdraw amounts above Rs 50,000. These cases are:
1. Medical treatment of depositor or person dependent on depositor.
2. Towards cost of higher education of depositor or dependent.
3. To meet obligatory expenses such as marriage, ceremonies etc.
4. Other unavoidable circumstances.
The RBI also adds in the circular that the amount "shall not exceed the sum of Rs. 5,00,000/- (Rupees five lakh only) or the actual balance lying to the credit of the account of such depositor, whichever is less."
This means nothing above ceiling of Rs 5 lakhs can be withdrawn. The notification does not talk about online transactions, but some of our readers pointed out to difficulties in online bank to bank transfers.
The RBI note clearly states that the bank during the moratorium period shall "not grant or renew any loan or advance, make any investment, incur any liability or agree to disburse any payment, whether in discharge of its liabilities and obligations, or otherwise enter into any compromise or agreement or shall transfer or otherwise dispose of any of its properties or assets, except to the extent and in the manner provided."
Online transactions are hit, redemptions are hit, and so are bank deposits. PhonePe an online transfer tool has been stung hard with the moratorium. A major part of operations of the fintech product depended on Yes Bank. Here's a report - PhonePe services hit as partner Yes Bank put under moratorium
Cartoonist: Satish Acharya
Text: Sify Finance Desk