Yes Bank Crisis: The Reserve Bank of India (RBI) on March 5, 2020 imposed moratorium on troubled private lender YES Bank, limiting cash withdrawals to Rs 50,000 per account. The restrictions became effective from 6:00 PM of March 5 and will be application till April 3, 2020. Any withdrawal exceeding the capped amount of Rs 50,000 would require the permission of RBI.
Moreover, the central bank also suspended the Board of Directors of Yes Bank for 30 days, considering the inefficiency of the board to raise the required capital in the last six months.
At the same time, the RBI exercised its powers under Section 36ACA (2) of the Banking Regulation Act 1949 to appoint Prashant Kumar, Chief Financial Officer of SBI, as the Administrator of the YES Bank.
All these decisions were taken by the RBI in consultation with the Central Government to protect the interest of depositors.
Cap of Rs 50,000 on withdrawals
As per the RBI notification, the YES Bank will now not be allowed to pay more than Rs 50,000 to any account holder be it savings, current or others.
Cases in which YES Bank account holders can withdraw amount exceeding Rs 50,000
In case of medical treatment of the account holder or any person dependent on him or her
In case of payment for higher education of depositor or person dependent on him or her for education
Obligatory expenses such as marriage or other ceremony of depositor or his or her children or person dependent upon him or her
Any unavoidable emergency
RBI’s message for YES Bank Depositors: The RBI assures the depositors that their interested will be fully protected and soon it will chalk out a plan for YES Bank’s reconstruction or amalgamation.
Capital-starved Yes Bank witnessed a steady decline in its financial position due to its inability to raise capital to deal with the NPAs and mounting bad loans. The bank was also facing critical governance issues. The Reserve Bank has been personally engaged with the Bank’s management to find ways to revive the lender’s balance sheet and infuse liquidity. However, after witnessing no sign of revival, the RBI approached the Central Government for imposing a moratorium on the Yes Bank under Section 45 of Banking Regulation Act, 1949.