Reserve Bank of India (RBI) vide press release no 2019-2020/2022 issued on dated 05.03.2020 has placed Yes Bank under moratorium from 05.03.2020 till 03.04.2020. Under moratorium period, account holder can withdraw only upto Rs 50,000/- irrespective of money lying in their bank account. However RBI has provided that on account of medical emergencies or expenses in connection to education or marriage or any other unavoidable emergency higher amount can be withdraw.
RBI has assured to the depositors and account holders of Yes Bank that there is no need to panic and their interest will be fully protected as RBI will explore and draw up a scheme of amalgamation and reconstruction of bank in next few days with the approval of Central Government and put the same in place well before the moratorium period of 30 days. Further RBI has issued certain directions to Yes Bank also to protect the interest of the depositors like not to grant any new loan or renewal of loan or making of any new investment etc.
Complete text of the press release, direction and notification can be read below:-
Press Release No 2019-2020/2022 dated 05.03.2020
The financial position of Yes Bank Ltd. (the bank) has undergone a steady decline largely due to inability of the bank 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 the recent years which have led to steady decline of the bank. The Reserve Bank has been in constant engagement with the bank’s management to find ways to strengthen its balance sheet and liquidity. The bank management had indicated to the Reserve Bank 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 as per the filing in stock exchange dated February 12, 2020. 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. In the meantime, the bank was facing regular outflow of liquidity.
After taking into consideration these developments, 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. Accordingly, the Central Government has imposed moratorium effective from today.
The Reserve Bank assures the depositors of the bank that their interest will be fully protected and there is no need to panic. In terms of the provisions of the Banking Regulation Act, the Reserve Bank will explore and draw up a scheme in the next few days for the bank’s reconstruction or amalgamation and with the approval of the Central Government, put the same in place well before the period of moratorium of thirty days ends so that the depositors are not put to hardship for a long period of time.
The Reserve Bank has also issued certain directions to the bank under section 35A of the Act ibid.
Chief General Manager
DOR. PSBD. No. 7117/16.01.137/2019-20
March 05, 2020
Directive under Section 35A of the Banking Regulation Act, 1949.
Whereas the Reserve Bank of India is satisfied that in order to protect the interest of the depositors and in public interest, it is necessary to issue certain directions to Yes Bank Ltd., Mumbai, Maharashtra (hereinafter referred to as ‘the banking company’), the Reserve Bank of India, in exercise of the powers vested under sub-section (1) of Section 35A of the Banking Regulation Act, 1949 hereby directs that Yes Bank Ltd., from 2000 hrs on March 5, 2020, 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 hereunder:
(i) Disbursement to depositors and creditors can be made to the extent permitted by the order of moratorium dated dated March 5, 2020.
(ii) Payment may be made of the amounts of bills received for collection on or before and realised before, on or after dated March 5, 2020.
(iii)Expenditure may be incurred towards meeting the obligations in respect of the following items.
a) salaries of employees,
b) rent, rates and taxes,
c) printing, stationery, etc.
d) postage and telegrams.
e) legal expenses not exceeding Rs.50,000/- (Rupees fifty thousand only) in each case, or such other higher amount as may be approved by the Reserve Bank of India for this purpose.
(iv) Payment of premium payable to the Deposit Insurance and Credit Guarantee Corporation can be made.
(v) Expenditure can be incurred on any other item, in so far as it is in the opinion of the banking company, necessary for carrying on its day-to-day administration.
Provided that the total expenditure on any item in any calendar month shall not exceed the average monthly expenditure on account of that item during the period of six months preceding the date of the directive, and if no expenditure has been incurred on account of that item in the past, the total payment shall not exceed a sum of Rs.50,000/- (Rupees fifty thousand only).
Provided further that the Reserve Bank of India may, on a case to case basis, approve higher amounts for this purpose, having regard to the facts and circumstances of each case.
2. If the banking company desires to incur any other expenditure on account of emergency during the currency of these directions, it has to take special permission from the Reserve Bank of India.
3. Reserve Bank of India further directs that the banking company shall submit to the Chief General Manager, Reserve Bank of India, Department of Regulation, Mumbai such statements as may be prescribed by the Reserve Bank of India in this behalf.
4. These directions shall remain in force during the period of moratorium unless otherwise intimated by the Reserve Bank of India and shall be subject to review.
MINISTRY OF FINANCE
(Department of Financial Services)
New Delhi, the 5th March, 2020
S.O. 993(E).—In exercise of the powers conferred by sub-section (2) of section 45 of the Banking Regulation Act, 1949 (10 of 1949), the Central Government, after considering an application
made by the Reserve Bank of India under sub-section (1) of that section, hereby makes an Order of Moratorium in respect of the Yes Bank Limited, Mumbai, Maharashtra for the period from 18:00 hrs on March 5, 2020 up to and inclusive of April 3, 2020 and hereby stays the commencement or continuance of all actions and proceedings against that banking company during the period of moratorium, subject to the condition that such stay shall not in any manner prejudice the exercise by the Central Government of its powers under clause (b) of sub-section (4) of section 35 of the said Act or the exercise by the Reserve Bank of India of its powers under section 38 of the said Act.
2. The Central Government hereby also directs that during the period of moratorium, the Yes Bank Limited, Mumbai, Maharashtra (the said banking company) shall not, without the permission in writing of the Reserve Bank of India,-
(a) make, in the aggregate, payment to a depositor of a sum exceeding Rs. 50,000/- (Rupees fifty thousand only) lying to his credit, in any savings, current or any other deposit account, by
whatever name called:
Provided that 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 limit
Provided further that wherever such depositor is having dues payable to the bank in any manner, either as a borrower or surety, the amount payable to such depositor shall be made after
adjusting the relevant borrowal accounts;
(b) make, in the aggregate, payment to any creditor exceeding a sum of Rs. 50,000/- (Rupees fifty thousand only) if not otherwise provided in this order, so however that this shall not affect making of payment of amounts towards any drafts or pay orders issued by the said banking company and remaining unpaid on the date on which the order of moratorium comes into force, or in paying the proceeds of the bills received for collection on or before the 5th March, 2020.
3. Without prejudice to the conditions stipulated in paragraph 2(a) of this Order in relation to payment to any depositor of the said banking company, the Reserve Bank may by a general or special order, permit the said banking company to allow payment to its depositors an amount in excess of Rs. 50,000/- (Rupees fifty thousand only) to meet unforeseen expenses, as under:
(i) in connection with the medical treatment of the depositor or any person actually dependent on him;
(ii) towards the cost of higher education of the depositor or any person actually dependent on him for education in India or outside India;
(iii) to pay obligatory expenses in connection with marriage or other ceremonies of the depositor or his children or of any other person actually dependent upon him;
(iv) in connection with any other unavoidable emergency:
Provided that the amount so allowed to be paid out of the balance lying to the credit of the depositor—
(a) shall be reckoned towards the payment due to him under any scheme of reconstruction or amalgamation as may be sanctioned by any competent authority in relation to the said banking company and subject to such conditions as may be provided under such scheme about appropriation of any payment made to a depositor of the said banking company before or on the coming into force of the scheme; and
(b) 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.
4. The Central Government hereby also directs that the banking company may, during the period of the moratorium imposed on it, make the following further payments, namely, the amounts for repaying loans or advances granted against Government securities or other securities, to the banking company by the Reserve Bank of India or the State Bank of India or by any other bank and remaining unpaid on the date on which this Order comes into force.
5. The Central Government hereby further directs that during the period of moratorium, the Yes Bank Limited shall be permitted to operate its accounts with the Reserve Bank of India or with any other bank for the purpose of making the payments aforesaid, provided that nothing in this Order shall be deemed to require the Reserve Bank of India or any other bank aforesaid to satisfy itself that the conditions imposed by this Order are being observed before any amounts are released in favour of the Yes Bank Limited.
6. The Central Government hereby also directs that the Yes Bank Limited may release or deliver goods or securities which have been pledged, hypothecated or mortgaged or otherwise charged to it against any loan, cash credit or overdraft:
(i) in any case in which full payment towards all the amounts due from the borrower or borrowers, as the case may be, has been received by it, unconditionally; and
(ii) in any other case, to such an extent as may be necessary or possible, without reducing the proportions of the margins on the said goods or securities below the stipulated proportions or the proportions which were maintained before this Order came into force, whichever may be higher.
[F. No. 7/19/2020-BOA-1]
AMIT AGRAWAL, Jt. Secy.