The Reserve Bank of India on Friday announced a draft scheme of reconstruction for the troubled private lender YES Bank, wherein the new investor will hold 49 per cent shareholding at a minimum price of Rs 10 per share. The central bank said the State Bank of India has expressed willingness to make investment in YES BankNSE -56.11 % and participate in its reconstruction scheme.
Meanwhile, Finance Minister Nirmala Sitharaman in a press conference said the SBI will inject fresh equity into the restructured YES Bank. She added that deposits and liabilities of the private sector lender will be honoured.
“YES Bank promoters failed to attract fresh equity despite genuine attempts. RBI restructuring scheme will be implemented in 30 days for YES Bank. Salaries of the bank’s employees are secured for one year,” she said.
Under the RBI’s reconstruction scheme for YES Bank, the authorised capital of the lender will stand altered to Rs 5,000 crore, and the number of equity shares will stand at 2,400 crore of Rs 2 each, aggregating to Rs 4,800 crore.
Under the scheme, SBI will agree to invest in the equity of the reconstructed bank to the extent that post infusion it holds 49 per cent shareholding in the reconstructed bank at a price not less than Rs 10, and will not reduce its holding below 26 per cent before completion of three years from the date of infusion of the capital.
The SBI will have two nominee directors appointed on the board of the reconstructed bank. The RBI may appoint additional directors in the bank.
The draft scheme has also been sent to YES Bank and State Bank of India for their comments. The suggestions and comments will be received by the Reserve Bank of India up to Monday, March 9.
The RBI will take a final view soon thereafter, it said in a release.
RBI said the instruments qualifying as additional Tier 1 capital, issued by the YES Bank under Basel-III framework, will be written down permanently, in full, with effect from the appointed date.
The central bank added that the members of the board so appointed shall continue in office for a period of one year, or until an alternate board is constituted by YES Bank through the normal procedure laid down in its Memorandum and Articles of Association, whichever is later.
Besides, all the employees of the reconstructed bank shall continue in its service with the same remuneration and on the same terms and conditions of service, the central bank said.
“It is on expected lines,” said Gaurav Dua, Senior Vice-President and Head of Capital Market Strategy & investments at Sharekhan by BNP Paribas.
“This is a bailout exercise for the bank and its depositors. The fresh infusion will help the bank to survive, but the future growth is still questionable. There isn’t much for the minority equity investors of the stock,” added Dua.
Earlier during the day, shares of YES Bank plunged 56 per cent after the cash-strapped lender was placed under a 30-day moratorium.
YES Bank on late Thursday was placed under a moratorium, with the RBI capping deposit withdrawals at Rs 50,000 per account for a month and superseding its board.
The bank will not be able to grant or renew any loan or advance, make any investment, incur any liability or agree to disburse any payment.
“I believe RBI tried to postpone the day of reckoning. They tried to tide the crisis so that YES Bank did not blow away when the NBFC crisis was in full cry,” said Saurabh Mukherjea, Founder of Marcellus Investment Managers.
“This is the best they could have come up with. All other options are off the table. This is the only logical solution that can be offered,” Mukherjea added.
Source: Economic Times