The board of directors of Federal Bank on Saturday (14 March 2020) approved an equity investment of Rs 300 crore for acquiring upto 30 crore equity shares of Yes Bank, for cash, at Rs 10 each, under the proposed Scheme of Reconstruction of Yes Bank under the Banking Regulation Act, 1949, subject to regulatory and government approval, if any.
The Union Cabinet on Friday, 13 March 2020, approved the reconstruction scheme for Yes Bank. The bank board will take over after the 7 days once the moratorium is lifted through the notifications. Last week, the Reserve Bank of India (RBI) had announced a draft scheme of reconstruction for Yes Bank.
Earlier, RBI superseded the board of Yes Bank and imposed a month-long moratorium. RBI also capped Yes Bank depositor’s withdrawals at Rs 50,000 per account for a month. It also appointed former chief financial officer (CFO) of SBI, Prashant Kumar as the administrator of Yes Bank.
Among other private bank players, ICICI Bank and HDFC Bank have committed to invest Rs 1000 crore each. Axis Bank and Kotak Mahindra Bank will invest Rs 600 crore and Rs 500 crore respectively. Bandhan Bank has committed to put Rs 300 crore and IDFC First Bank will invest Rs 250 crore in in cash starved bank.
Shares of Federal Bank dropped 5.18% to Rs 65 while Yes Bank surged 46.58% to Rs 37.45.
Federal Bank’s net profit jumped 32.1% to Rs 440.64 crore on a 13.3% increase in total income to Rs 3,738.22 crore in Q3 December 2019 over Q3 December 2018.
Federal Bank operates through four segments: treasury, corporate or wholesale banking, retail banking and other banking operations.