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YES Bank’s full banking services to resume from March 18, new rescue plan comes into effect

YES Bank’s full banking services to resume from March 18, new rescue plan comes into effect

The full bank services of Yes Bank will resume from 6 pm on March 18, 2020 (Wednesday). The bank confirmed the same through a tweet.

Yes Bank tweeted saying that customers can visit any of their 1,132 branches from Mar 19, 2020 during banking hours to access their services. The customers will also be able to access their digital platforms and services.YES Bank’s full banking services to resume from March 18, new rescue plan comes into effect 1

This means that users will be able to use their credit and debit cards and access their net banking. The news comes as Yes Bank’s share prices climbed over 46.38 per cent at Rs 37.40 in a single day. In fact, on March 16, Yes Bank share price surged 58 percent.

The Union Finance Ministry issued a notification on Yes Bank’s reconstruction scheme on March 13 and stated that the moratorium issued by the government will cease to be in effect from 6 pm on March 18. The SBI and other investors have expressed interest in making an investment in the private sector bank and to participate in its rescue plan.  

YES Bank’s Reconstruction Scheme

• Under Yes Bank’s rescue plan, the authorized capital of the reconstructed bank will be altered to Rs 6200 crore and the number equity shares to Rs 3000 crore, while the preference share capital will continue to be Rs 200 crore.

• The interested investors shall invest in the reconstructed bank and the reconstructed bank will only allot its equity shares for Rs 10 with a face value of Rs 2 and premium of Rs 8 subject to the condition that after infusion of equity capital, the equity shareholding of the investor bank will not be less than 26 percent and not more than 49 percent of the total equity shares of the reconstructed Yes Bank.

• Further, the investor will not reduce its equity shareholding below the given 26 percent mark of the total equity shareholding of Yes Bank before 3 are completed from the date of allotment of shares.

• The reconstructed bank can begin allotting its equity shares after two working days following the beginning of the reconstruction scheme.

• The investors who have bought the shares of the reconstructed bank will not be required to pay capital gains tax under the Income Tax Act, 1961for any profit or gains due to such subscriptions.

• There will be a 3 year lock-in period from the start of the scheme concerning the shares held by existing shareholders on the date of the scheme’s commencement and shares allotted to the investors under the plan.

New Board of Directors to be constituted

A new board of directors will be constituted, which will comprise the following people:

1. Prashant Kumar: Former CFO/ Deputy MD of SBI will be the new CEO and MD of Yes Bank.

2. Sunil Mehta: Former Non-Executive Chairman of PNB will be the new non-executive chairman of reconstructed Yes Bank.

3. Mahesh Krishnamurthy: Non-Executive Director

4. Atul Bheda: Non-Executive Director

In addition to this, the investor banks will nominate two officers as Directors of the reconstructed bank in addition to the given names. The RBI may also appoint additional directors as it may deem necessary. The investor with voting right of 15 percent will have the right to nominate one Director on the reconstituted Board. The total number of Board members, excluding the additional directors appointed by the RBI, shall, however, not exceed the maximum prescribed under the articles of association.

Term

The term of the board members will be for one year or until an alternate board is constituted by the reconstructed bank, whichever is earlier.

Employees

All employees of the reconstructed bank will continue their services on the same terms and with the same remuneration as applied to such employees before the commencement of the scheme for a minimum of one year.

The branches of the reconstructed bank will continue to function in the same manner and location as they did before the implementation of the reconstruction scheme. The reconstructed bank will be open to launch new branches or close down existing ones in accordance with RBI guidelines.

Background

The Reserve Bank of India (RBI) had placed YES Bank under a moratorium on March 5, 2020 as the bank had given out large loans and failed to recover them. The RBI decided to step in when the private sector lender failed to raise $2 billion to save itself. The apex bank then set a withdrawal limit of Rs 50,000 per account per person.

Shortly after the move, the government announced a reconstruction plan for YES Bank, which came into effect on March 13. The plan involves SBI and other investors including ICCI, HDFC, Axis and Kotak Mahindra investing in Yes Bank and effectively owning at least 49 percent stake in the bank.


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