Shares in India’s fourth-largest private lender Yes Bank plunged close to 60 per cent on Friday after the central bank seized control and imposed withdrawal limits. At 12:30 pm, the price was Rs 15.15 per share.
Queues formed outside Yes Bank branches after the announcement late on Thursday that customers can only withdraw Rs 50,000.
The country has been grappling with a liquidity crunch caused by the near-collapse more than a year ago of IL&FS – finance houses responsible for significant consumer lending. Yes Bank has been particularly badly hit as it struggles under a mountain of bad loans.
The rupee weakened to its lowest since 2018 and stocks tumbled after the RBI move, intensifying the risk-off mood fuelled by the spread of coronavirus cases.
“Investors have turned risk averse and the contagion is likely to hit smaller bank and non-bank finance companies,” said Abhimanyu Sofat, Mumbai-based head of research at IIFL Securities Ltd. “How soon the RBI finalises the rescue plan is key as persistent operational curbs increase uncertainty.”
The central bank imposed a moratorium on the private lender till April 3, 2020 and named State Bank of India (SBI) to lead a consortium to pull Yes Bank out of crisis. The SBI board has given an “in-principle” approval to invest in the capital-starved bank.
Former finance minister and Congress leader P Chidambaram on Friday termed Yes Bank crisis as a completely “regulatory failure” and said there is no need to panic as the Reserve Bank of India (RBI) placed restrictions on the bank.
“Let’s see what depositors of Yes Bank do. I think they are as worried as depositors of PMC Bank. Let’s see what unfolds now. Obviously, there is no need to panic,” he said.
During the period of moratorium, the Yes Bank Limited shall not, without the permission in writing of the Reserve Bank of India, make, in the aggregate, payment to a depositor of a sum exceeding Rs. 50,000 lying to his credit, in any savings, current or any other deposit account.
