YES Bank rescue package wards off immediate losses to depositors – The Hindu BusinessLine

But many loose ends remain. With YES Bank skipping recent financial results, it isn’t clear how much capital it will need to fully tide over this crisis

In a bid to control the damage to public confidence from the collapse of a large commercial bank, the Centre and the Reserve Bank of India have cobbled together a quick bailout package for YES Bank. Invoking Section 45 of the Banking Regulation Act, the Centre has imposed a 30-day moratorium on all pay-outs to its depositors or creditors in excess of ₹50,000. The RBI has proposed a draft reconstruction scheme, taking effect on Monday, which supersedes the bank’s Board, expands its authorised capital and allows SBI to infuse ₹2,450 crore in capital for a 49 per cent equity stake. No changes are proposed to the rights of creditors or employees, but holders of additional Tier 1 bonds will suffer a 100 percent haircut. One can debate whether the RBI and the Centre ought to have initiated this damage control exercise many months ago, given that YES Bank’s saga of regulatory run-ins and reneged promises on fund-raising has played out for well over a year. But the package does protect depositor interests in YES Bank by bringing in SBI as rescuer. Neither India’s banking system nor its deposit insurance framework is equipped to deal with the failure of a large commercial bank with a ₹2 lakh-odd crore deposit base. With a non-controlling stake, the capital demanded of SBI for the bailout is also relatively modest.