RBI’s Rs50,000 cap on withdrawals from Yes Bank may go 10 days before deadline
The limit of ₹50,000 the Reserve Bank of India (RBI) placed on cash withdrawals by Yes Bank customers is likely to not last beyond 23 March, a good 10 days ahead of the 3 April deadline set by the central bank, sources familiar with the development told Mint.
“With State Bank of India (SBI) running the bank, concerns over liquidity and viability of Yes Bank as a going concern have receded. Placing caps on withdrawals can be counter productive. The RBI feels the limit can be withdrawn earlier and that should happen by 23 March,” one of the sources said.
The ₹50,000 cap is the aggregate limit across all accounts — savings, term or current — the RBI placed on Yes Bank customers on 5 March when it put the private lender under a moratorium. It subsequently proceed to ask SBI to take a 49% stake in the Rana Kapoor-founded bank to ward off its collapse that could otherwise have had consequences for the broader financial system.
“The RBI was internally targeting 16 March to remove the cap on withdrawals. But it had not factored in certain events. In the event of holders of the bank’s additional tier 1 (AT1) instruments going to the Supreme Court (SC) which is a high probability, the 16 March aim may get pushed off by a week,” another source said.
The second source said the central bank could lift the cap in one go by 16 March or else do it in stages, doubling the cap first to Rs1,00,000 and so on to finally lift it by 23 March.
It turns out that Yes Bank had sold AT1 bonds as a fixed deposit product to mutual funds and pensioners, when it a riskier product. According to Basel III norms, AT1 capital of a bank can be reduced to zero, something the RBI did with Yes Bank when it announced its 5 March moratorium decision.
Yes Bank’s AT1 is expected to be between ₹2,500 crore and ₹3,600 crores, all now reduced to junk. It now being clear that AT1 bonds are quasi equity instruments, yields on them are now expected to surge.
Under the RBI’s ‘Yes Bank Ltd Reconstruction Scheme, 2020’, SBI will take up to 49% stake in the troubled lender at Rs10 per share. SBI Chairman Rajnish Kumar told media persons on Saturday that the state-owned bank had interest from as many as 23 investors to pick up stake in Yes.
SBI has so far committed to invest up to Rs10,000 crore in Yes and the RBI too is said to be working on a special liquidity window of as much amount for it, according to Moneycontrol.