State Bank of India was down 6.07%.
Among the public sector banks, IDBI Bank (down 7.19%), Andhra Bank (down 6.07%), Canara Bank (down 5.92%), Bank of India (down 5.6%), Punjab National Bank (down 4.57%), UCO Bank (down 4.57%), Punjab & Sind Bank (down 4.42%), Bank of Maharashtra (down 3.68%), Central Bank of India (down 3.53%), Union Bank of India (down 3.43%), Bank of Baroda (down 2.58%), Indian Bank (down 2.15%), United Bank of India (down 19.12%), Corporation Bank (down 16.54%), Allahabad Bank (down 15.12%) and Syndicate Bank (down 1.67%) declined.
Among the private banks, Yes Bank (down 34.87%), RBL Bank (down 16.12%), IndusInd Bank (down 7.82%), ICICI Bank (down 3.88%), Axis Bank (down 3.69%), Federal Bank (down 3.49%), HDFC Bank (down 2.68%), Kotak Mahindra Bank (down 1.81%) and City Union Bank (down 1.73%) edged lower.
The Government, after considering an application made by the Reserve Bank of India (RBI) has placed Yes Bank under moratorium for the period from 18:00 hrs on 5 March 2020 up to and inclusive of 3 April 2020.
The Government also directed the Yes Bank that without the permission of the RBI it shall not make payment to a depositor of a sum exceeding Rs 50000 in any savings, current or any other deposit account. The bank shall not make payment to any creditor exceeding a sum of Rs 50000 during the moratorium period.
As per the RBI, the financial position of Yes Bank (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. 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 materialize. In the meantime, the bank was facing regular outflow of liquidity.
After taking into considering 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.
In exercise of the powers conferred under 36ACA of the Banking Regulation Act 1949, the Reserve Bank has in consultation with Central Government, superseded the Board of Directors of Yes Bank for a period of 30 days owing to serious deterioration in the financial position of the Bank.
Prashant Kumar, ex-DMD and CFO of State Bank of India has been appointed as the administrator under Section 36ACA (2) of the Act.
This has been done to quickly restore depositors’ confidence in the bank, including by putting in place a scheme for reconstruction or amalgamation.