Yes Bank Under RBI’s 30-Day Moratorium, Indian GDP To Take a Hit?

After a high conflicting PMC Bank lockout, Reserve Bank of India has now taken Yes Bank’s reins in its hands. On Thursday, 5^th March 2020 RBI declared that it is superseding and taking over the affairs of Yes Bank until April 3^rd. Moreover, the central bank has appointed a new Administrator Prashant Kumar to manage further operations. RBI is further coming up with a rescue plan for Yes Bank to overcome this crisis.

What is the Yes Bank Crisis that is making headlines?

Friday morning, every news channel, social media site, was filled with the Yes Bank crisis news. Delving in the matter further, it came to light that RBI overtook India’s fifth largest private sector lender, Yes Bank. The reason behind this harsh decision was a steady decline in Yes Bank’s financial position as the bank was unable to raise capital.

Yes Bank had struggled to raise capital since last February due to bad loans. The bank was not able to reach the regulatory requirements claims RBI. Although, the central bank was constantly in touch with bank management to deal with the crisis. But lack of details from Yes Bank deserved strict measures.

Yes Bank Crisis Breaks Depositors Backbone

The present situation feels like a repeat of the PMC bank situation. The government on Thursday imposed a withdrawal limit of Rs 50,000 for depositors of the beleaguered Yes Bank. However, exceptions can be made for marriages, health emergencies, assured RBI. Depositors can withdraw up to Rs 5 lakh, or the amount lying in the account, whichever is less, in circumstances such as a medical emergency or marriage. There is a relief for the Yes Bank employees as their salary won’t be affected. Although, loan renewals and disbursement will be halted until further notice.

The Crisis Affecting Indian Market

The market is also affected by this Yes Bank crisis. As far as the share market is concerned, Yes Bank shares have fallen 55%; the lowest this lender has seen.

Even the Indian Rupee has fallen against Dollar. The rupee is trading as high as 74 per US Dollar. Looking at the last 5year chart, this is the highest Rupee has traded. Earlier in 2018, the rupee had reached 73 against USD. However, it had recovered since then.

In the moment of crisis, the Indian Finance Minister, Nirmala Sitharaman has assured that she is in constant touch with RBI. “Depositors Money is safe”, she added.

Amidst all the crisis, it is yet to see how RBI plans to overhaul Yes Bank from this situation. After 30 days lockout period, whether RBI intends to restructure or coalesce the bank with other banks is the question.

On the other hand, RBI is taking strict measures to enhance the economy of the country. RBI plans to review the Supreme Court’s decision to lift the Crypto Ban on India.

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