New Delhi: YES Bank shares slumped 85 percent on Friday, marking the biggest intraday fall ever, after the RBI (Reserve Bank of India) superseded the board and imposed a month-long moratorium on March 5. The Central bank has also imposed a limit on cash withdrawals from the bank and has said that customers cannot withdraw more than Rs 50,000 in the next month.
This is the first time that the Central bank has acted against a big bank since 2004 when it got government-owned Oriental Bank of Commerce (OBC) to acquire Global Trust Bank in order to rescue the private sector lender.
RBI action comes after YES Bank failed to raise funds
The RBI crackdown comes after YES Bank failed to raise funds that would have helped it provide against loan losses. The Central bank said that Prashant Kumar, former deputy managing director at State Bank of India, will be the administrator of YES Bank.
YES Bank cannot make in aggregate, payment to a depositor of a sum exceeding Rs 50,000 lying to their credit, in any savings, current or any other deposit account till April 3, said a government notification. The RBI, however, said it may allow payment of over Rs 50,000 to Yes Bank depositors for expenses like medical treatment, marriage and education.
The RBI said that it was prompted to supersede the board because of lax governance practices at YES Bank. “In the absence of a credible revival plan, and in the public interest and the interest of the bank’s depositors, (the RBI) had no alternative but to apply to the central government for imposing a moratorium,” the Central bank said.
On March 5, the market was abuzz with news of a takeover bid by SBI and LIC for YES Bank.
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According to reports, the two state-owned companies are likely to acquire 49 percent in the private lender.