Cabinet clears SBI’s 49 pc stake in Yes Bank: FM

The Union Cabinet on Friday approved reconstruction scheme for Yes Bank under which SBI will acquire 49 per cent stake in the crisis-ridden private sector bank.

Finance Minister Nirmala Sitharaman said the Union Cabinet has approved the reconstruction scheme for Yes Bank as suggested by the Reserve Bank. On March 5, the RBI imposed a moratorium on Yes Bank, restricting withdrawals to Rs 50,000 per depositor till April 3.

The RBI also superseded the board and placed it under an administrator, Prashant Kumar, former deputy managing director and CFO of SBI.

Giving details about the scheme, Sitharaman said SBI will invest for 49 per cent equity in Yes Bank and other investors are also being invited.

There will be a three-year lock-in period for all the investors, she said. However, the lock-in period for SBI would be only for the 26 per cent of the shareholding.

The authorised capital of the lender has been increased to Rs 6,200 crore from Rs 1,100 crore, the finance minister said. Sitharaman said the scheme has been approved with the objective of protecting the interest of depositors and providing stability to Yes Bank as well as to the entire financial system. On Thursday, SBI said it will invest Rs 7,250 crore in Yes Bank, which is much higher than Rs 2,450 crore it had planned initially for 49 per cent stake in the private sector lender that began operations in 2004.

Sitharaman also said the government as well as the RBI are “closely monitoring” the domestic and global stock markets, which are facing intense volatility amid mounting coronavirus fears.

Sitharaman added that different departments of the government are working to provide relief to industry, which could be severely impacted by the fast-spreading virus.

“As it is global markets have all had severe volatility and we are also consciously monitoring all of them. It is no consolation to say that the stock markets elsewhere have also suffered. I am conscious of that but globally there is a serious repercussion felt and we are conscious of the developments. Together with RBI we are closely monitoring,” she said.

After being battered in the early session, the BSE Sensex spurted 1,325.34 points and the NSE Nifty rose 365.05 points to end in the green.

As coronavirus-led recession fears triggered panic selling globally, both Sensex and Nifty plunged over 10 per cent in the opening session, hitting their lower circuit levels. On coronavirus, the finance minister said the Centre is in touch with the states and has been continuously monitoring the situation.

It has been made sure that effective timely steps are taken to safeguard Indian interests and also to ensure that Indians who travelled abroad are tested and monitored, she said. Where necessary and wherever possible, they are being brought back to the country, she added.

“I had held a meeting with all the industries concerned to address issues which are coming out of the challenge of the coronavirus and for them each department has been now spending a lot of time to see how best they can give relief from the challenges that they are facing. So we are seized of the matter and we are monitoring the situation,” Sitharaman added.

To another related query, she said different sectors of the economy are engaging with the departments concerned almost on a daily basis. “So we are trying to attend to the requirement of the industries and also see where each department will have to make an intervention where it is related to their own activities. So yes we are moving on that front,” said Sitharaman.

The RBI has already announced steps to infuse liquidity in the foreign exchange market. It will be selling $2 billion worth of American currency on Monday as part of its first tranche of liquidity infusion through swap auction.

Cash withdrawal restrictions and other moratorium conditions on Yes Bank will be lifted within 3 days of “very soon” to be notified SBI-led bailout plan for the beleaguered lender, Sitharaman said.

Meanwhile, private sector lender ICICI Bank has announced to invest Rs 1,000 crore for an equity in excess of 5 per cent in the crisis-ridden bank. HDFC will also infuse Rs 1,000 crore, while Axis Bank will invest up to Rs 600 crore to purchase 60 crore shares in the bank.

Sitharaman said the central bank is engaged with other financial institutions for investment as part of the scheme to resurrect Yes Bank under RBI imposed moratorium since March 5.

Sitharaman parried questions whether Tamil Nadu-based Lakshmi Vilas Bank has approached the RBI for rescuing it from problems it is reportedly facing like the troubled Yes Bank. “You should ask the RBI if they have approached it. RBI will be able to tell you,” she told a reporter who wanted to know whether the government has any information on that.