Reserve Bank of India (RBI) supersedes Yes Bank board, limits withdrawals to Rs. 50,000

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  Reserve Bank of India (RBI) supersedes Yes Bank board, limits withdrawals to Rs. 50,000

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  1. The RBI superseded the board of troubled private sector lender YES Bank and imposed a 30-day moratorium on it “in the absence of a credible revival plan” amid a “serious deterioration” in its financial health.
  2. Former State Bank of India chief financial officer Prashant Kumar has been appointed administrator of YES Bank.
  3. Each depositor will be able to withdraw only up to Rs 50,000 in total till the moratorium is in place but in exceptional circumstances such as a medical emergency or marriage, depositors can withdraw up to Rs. 5 lakh or the amount lying in account, whichever is less.
  4. This is the first time that a bank of this size will be put under a moratorium by the RBI.
  5. During the moratorium, which came into effect from 6 pm on March 5, YES Bank will not be allowed to grant or renew any loans, and “incur any liability”, except for payment towards employees’ salaries, rent, taxes and legal expenses, among others.
  6. The financial position of YES Bank had 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”.
  7. In November 2019, the bank reported a net loss of Rs 600 crore for the three months to September primarily owing to a one-time deferred-tax asset (DTA) adjustment of Rs 709 crore. The bank had posted a net profit of Rs 965 crore in the same period last year but its gross NPAs increased to Rs 17,134 crore in the quarter ended September from Rs 3,866 crore in the year-ago period.
  8. Net NPAs moved up to Rs 9,757 crore from Rs 2,019 crore in the same period. The percentage of net NPAs jumped from 0.84 per cent in Q2 FY19 to 4.35 per cent in Q2 FY20.
  9. The bank made provisions of Rs 1,336 crore for the quarter. The bank’s total outstanding advances were at Rs 2.24 lakh crore in the quarter under review, down 6.3 per cent year-on-year. The bank also saw a decline in total deposits by six per cent to Rs 2.09 lakh crore.
  10. Mumbai-headquartered Yes Bank was incorporated in 2004. The bank’s asset size stood at Rs. 3,71,160 crore at the end of June 2019. The bank has 1,120 branches and 1, 456 ATMs across the country.
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PT's IAS Academy: Reserve Bank of India (RBI) supersedes Yes Bank board, limits withdrawals to Rs. 50,000
Reserve Bank of India (RBI) supersedes Yes Bank board, limits withdrawals to Rs. 50,000
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