Wednesday, December 2, 2020
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RBI publishes scheme of reconstruction draft for Yes Bank, State Bank of India to pick up 49% stack at ₹10 per share

SBI will hold 49% stack in the bank by infusing fresh capital. SBI will buy the shares of the bank at a price of ₹10, which means it will be paying a premium of ₹8 on the shares of face value ₹2

A day after placing Yes Bank under moratorium, the Reserve Bank of India today published a draft of scheme of reconstruction for the troubled private sector bank. Yesterday, the central bank had taken over the management of the bank, and limited withdrawals to ₹50,000 for a month. According to the reconstruction plan prepared by RBI, public sector bank State Bank of India will infuse capital in Yes Bank by acquiring 49% stack.

According to the ‘Yes Bank Ltd. Reconstruction Scheme, 2020’, the authorised share capital of Yes Bank will be altered to ₹5,000 crore, and the number of equity shares will be 2,400 crore, having a face value of ₹2, which means the aggregate value of shares will be ₹4,900 crore. As the Investor Bank, SBI will hold 49% stack in the bank by infusing fresh capital. SBI will buy the shares of the bank at a price of ₹10, which means it will be paying a premium of ₹8 on the shares of face value ₹2. SBI will not reduce its holding in the bank below 26% before three years from the date of investment.

After SBI picks up the stake, a new board will be constituted for the bank, and the administrator appointed by RBI will hand over the control of the bank to the newly formed board. State Bank of India will nominate two directors in the board of directors, while RBI may appoint additional directors exercising its powers.

After Yes Bank is reconstituted with capital infusion from SBI, all its schemes, contacts, deeds, bonds, agreements etc will remain effective, as they were before. All deposits and liabilities with the bank will continue as before, under the existing terms and conditions.

The scheme of reconstruction states that all the employees of the bank will retain their jobs, they will continue in their service with the same remuneration and same terms and conditions. The reconstruction will also not affect the existing offices and branch network of Yes Bank, and they will continue to function in the same manner as earlier.

RBI has sent the draft to both Yes Bank and SBI, and has invited suggestions and comments from members of public, including the banks’ shareholders, depositors and creditors on the draft scheme. The Reserve Bank will finalise the scheme after receiving suggestions till 9th March.

Earlier in the day, finance minister Nirmala Sitharaman had informed that SBI has expressed willingness to invest in Yes Bank. She assured that the revival scheme will be completed within the 30 days, and deposits and liabilities will remain unaffected. The finance minister also said that Yes Bank jobs and salary will be assured for at least one year.

Nirmala Sitharaman informed that RBI has asked to probe roles played by individuals in Yes Bank, and SEBI is also looking into the issue. “I want RBI to ensure that due process of law is set to roll with a sense of urgency so that we should find out as to who led to the problem of this size & magnitude,” she said.

The moratorium imposed on Yes Bank has affected not only its depositors, but a large section in the financial sector. A number of financial services companies that have Yes Bank as their partners have been affected, including payment firms PhonePe and BharatPe. Yes Bank is a major player in the UPI market, therefore, overall UPI transactions will come down as third party UPI apps with Yes Bank as partner have stopped working. A large number of small co-operative banks also use Yes Bank for their NEFT/RTGS/IMPS as a sponsor bank, and these banks will not able to transfer funds unless they move to a different bank.

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