The Reserve Bank of India (RBI) on Thursday imposed a moratorium on troubled lender Yes Bank and capped withdrawals at Rs 50,000, said sources. The private sector lender has been grappling with mounting bad loans.
A statement said that the RBI has superseded the board of Yes Bank with immediate effect, appointing former State Bank of India (SBI) Chief Financial Officer (CFO) Prashant Kumar as administrator for the troubled bank.
Earlier in the day, sources said SBI along with some other financial institutions would bail out capital-starved Yes Bank, with the government giving the go-ahead.
"The Reserve Bank came to the conclusion that in the absence of a credible revival plan, and in public interest and the interest of the bank's depositors, it had no alternative but to apply to the central government for imposing a moratorium under Section 45 of the Banking Regulation Act, 1949," the RBI said in a statement late in the evening.
The statement said the bank management had indicated that it was in talks with various investors and they were likely to be successful. The bank was also engaged with a few private equity firms for exploring opportunities to infuse capital.
"These investors did hold discussions with senior officials of the Reserve Bank but for various reasons eventually did not infuse any capital.
"Since a bank and market-led revival is a preferred option over a regulatory restructuring, the Reserve Bank made all efforts to facilitate such a process and gave adequate opportunity to the bank's management to draw up a credible revival plan, which did not materialise," the statement said.
In the meantime, the bank was facing regular outflow of liquidity, the apex bank said, justifying its actions.
As news of the capping broke, harried Yes Bank depositors rushed to ATMs to withdraw cash but faced multitude of problems, including closed down machines and long queues. Aggravating the problems for depositors were difficulties accessing the internet banking channel, which ensured they cannot transfer the funds online as well.
The actions come hours after sources said the government has approved a plan wherein State Bank of India (SBI) and other financial institutions would bailout Yes Bank.
If the plan is implemented, it would be the first major instance in many years where a private sector lender would be bailed out using public money.
In 2004, Global Trust Bank was amalgamated with Oriental Bank of Commerce and in 2006, IDBI Bank took over United Western Bank.
The latest development comes six months after the regulator did the same with the city-based cooperative lender PMC Bank after a large scam was unearthed.
(With inputs from PTI)