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Old 6th March 2020, 10:29   #1
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Default SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

The government has restricted withdrawal from Yes Bank accounts at Rs. 50,000 for the next one month. The restriction came into effect from 6 pm yesterday and will remain in place till April 3, 2020.

SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed-iu11.jpeg

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Capping a day of fast paced developments, the RBI imposed a 30-day "moratorium" on Yes Bank late on Thursday, putting a withdrawal limit of Rs 50,000 per depositor, regardless of the number of accounts held in the bank. Only in case of a medical emergency, higher education or marriage, will a depositor be allowed to withdraw upto a maximum of Rs 5 lakh. RBI has also superseded the Yes Bank board and appointed former SBI CFO Prashant Kumar as Yes Bank's administrator.

For a song: The RBI action came in the wake of SBI and LIC agreeing to jointly buy 49% stake in Yes Bank for Rs 2 per share, amounting to a payout of Rs 490 crore, as per a report in Economic Times. This amount, according to a report by Macquarie Capital Services, is Rs 489.9999999 crore extra, as it puts the total value of Yes Bank at Re 1. According to the report, once India's 10th largest bank by market value, Yes Bank, which is now ranked 24th among 41 listed public and private sector banks, has a net worth of zero. The bank's market value on BSE on Thursday stood at Rs 9,398 crore. In fact, in the last one year, its share price fell to a tenth, from a high of Rs 285.90 in April 2019 to Rs 28.05 in March 2020, before a gain of almost 26% on Thursday, to close at Rs 36.85.

Negative territory: According to the report, Yes Bank's net worth of Rs 25,000 crore is overshadowed by its below investment grade book (BB & below) of Rs 30,000 crore and investment grade book (BBB) of Rs 50,000 crore. The report adds that if it's assumed that a "substantial proportion of BB & below book is wiped off and say 10-15% of BBB book is to be written off, it implies the current net-worth of the bank is zero (after factoring in 25% tax benefits). Ideally and theoretically speaking, SBI and other PSU banks need to buy the bank at Re 1." The bank's plans to raise $2 billion to shore up its capital base have also not fructified.

Lies and deception: Yes Bank's problems came to the fore in 2017 when the RBI found that the private sector bank had under-reported its bad loans by over half a billion dollars as against gross non-performing assets (NPAs) of $113 million reported by the bank for 2015-16, RBI found its NPAs were actually $630 million more. By next year, that is 2016-17, the under-reporting of NPAs widened to $980 million which led to the ouster of the bank's founder and chief promoter Rana Kapoor by the RBI. Among the companies it had lent money to, the Anil Ambani group owed $1.85 billion while media and entertainment conglomerate Zee Enterprises owed $470 million. That apart, Yes Bank also had exposure to the tune of Rs 500 crore to Coffee Day Enterprises which runs Cafe Coffee Day outlets whose owner V G Siddhartha had committed suicide last year.
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Old 6th March 2020, 11:23   #2
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Default re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

One more bank and one more panic. This was long overdue. Its time we set up an apex body that regulates loan amount greater than an upper limit. Private banks are under pressure from investors to show unreasonable results . This pushes them to provide large loans to companies having not so solid business models on the basis of recommendations from PE counselors whose credentials are doubtful at best. When the model fails, the bank is left with a huge NPA and a mortgage that would not cover even the principal amount. All these PE brokers would basically ruin the banking systems with their over estimates of projected business revenue from companies like Cafe Coffee day. The result, 50K limit for the common man , a suicide and RBI intervention.

The worst is yet to come as there is the talk of Yes bank being absorbed by SBI. Now the NPA's of Yes bank would get into the books of SBI. While the common man has to mortgage life and limb for a loan, these banks welcome the likes of Mallya and Co.

As Warren Buffet once said " Not money, but more sticks are needed" when asked what is needed to tackle the depression of 2008-09. Its time govt brings in more tougher lending norms.
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Old 6th March 2020, 14:42   #3
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Default re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

I am an impacted party here. Yes Bank is our (me+wife joint) primary account for FDs and stuff. Guess should have read the signs early and shifted our funds.
Though, this leaves a question - after paying taxes through nose, whatever we save, if that is not secure in a bank of this size, what are people supposed to do? The government machinery shouldn't be held responsible for reaching this level and not taking any actions well in advance?

Last edited by Aditya : 7th March 2020 at 15:31. Reason: Typo
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Old 6th March 2020, 14:57   #4
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Default re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

Sorry for everyone who has their hard earned money sitting in Yes Bank right now. If the news of SBI and LIC buying fresh stake is true, then things should go uphill from here (might take some time though).

TOI had an interesting article narrating why Yes Bank is in this position. Long story short - the bank was being run like a 'Lala company', which obviously becomes impossible to sustain as you get scale.

https://timesofindia.indiatimes.com/...w/74502001.cms
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Old 6th March 2020, 15:10   #5
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Default re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

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Originally Posted by beat runner View Post
I am an impacted party here. Yes Bank is our (me+wife joint) primary account for FDs and stuff. Guess should have read the signs early and shifted our funds.
Though, this leaves a question - after paying taxes through nose, whatever we save, if that is not secure in a bank of this size, what are people supposed to do? The government machinery shouldnt be hold responsible for reaching this level and not taking any actions well in advance?
Sorry to hear about your corpus in YES bank.

I suggest you shift all your funds to nationalized banks even if they offer bit lower interest rate
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Old 6th March 2020, 15:17   #6
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Default re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

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Originally Posted by beat runner View Post
I am an impacted party here. Yes Bank is our (me+wife joint) primary account for FDs and stuff. Guess should have read the signs early and shifted our funds.
I am in the same boat as you. Made a significant investment after being lured their higher FD rates and now I am stuck. I am hoping that the regulators increase the deposit insurance to 10lakhs from the measly 1 lakh which it is now.
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Old 6th March 2020, 15:30   #7
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Default re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

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Originally Posted by beat runner View Post
I am an impacted party here. Yes Bank is our (me+wife joint) primary account for FDs and stuff. Guess should have read the signs early and shifted our funds.
Though, this leaves a question - after paying taxes through nose, whatever we save, if that is not secure in a bank of this size, what are people supposed to do? The government machinery shouldnt be hold responsible for reaching this level and not taking any actions well in advance?
Don't worry, it will be Ok. A close relative had her lifesavings in PMC bank. The amount was supposed to go towards a purchase of a new home. After the initial shock, we proceeded to withdraw whatever we could - there will always be provisions for marriage, education and medical expenses. Though 99% of the corpus is still frozen, we have hopes for a merger with another bank which would make things normal.

As far as the deposit insurance is concerned, it comes into picture only when the bank is merged / amalgamated / liquidated. No relief if in limbo. Thanks to RBI's move to enhance the limit to 5 lakhs, there is some relief. Do read up on the FAQ here.
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Old 6th March 2020, 15:52   #8
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Default re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

My sympathies to everyone who trusted this bank and put their hard earned money in this bank.
I hope some positive solution is in the offing.

Zerodha & Edelweiss AMC, last evening, tweeted asking all customers who have their dividends or other payments going into Yes Bank to kindly contact Zerodha & Edelweiss AMC and these two will facilitate change of bank account on priority basis so that your money is not further stuck there.

Edelweiss AMC - https://twitter.com/GAB_Indian/statu...62041529995264

Zerodha - https://twitter.com/Nithin0dha/statu...18502112727040

I am not aware of other fund houses / AMC but I am sure they too will be helping their customers with Yes Bank accounts on a pro-active basis.

Finally, in my personal opinion, I will now have to start moving my parent's FDs to SBI.
SBI gives a lower rate of interest but the peace of mind is incalculable.
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Old 6th March 2020, 15:54   #9
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Default re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

I can understand the plight of all account holders of Yes Bank. But what I can make out of the current situation, the money will NOT be lost. Every single rupee of account holders will be safe/ paid out. People asking about 5L/1L deposit insurance: This clause is invoked only at the final stages of bankruptcy. I doubt things will go down to that level; so the question does not come in. There's a press conference by the FM in a shortwhile. That should clear a lot of things for the account holders, investors and the future of Yes bank.
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Old 6th March 2020, 16:27   #10
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Default re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

It is best to have accounts at 3 different banks:

1) Public sector bank
2) Foreign bank (Citibank, HSBC etc)
3) Private sector bank

Meanwhile, Yes Bank deposit holders and customers will NOT lose a single Rupee. Forget 1 lakh or 5 lakh deposit insurance. RBI will not let commercial banks like Yes Bank go down with depositors' money. Because the consequences will be disastrous. So what will happen is that Yes Bank's assets and liabilities will be acquired by another bank.

But speculators should NOT buy Yes Bank stock at Rs. 15 or Rs. 10 or whatever. Very likely this sucker is going to zero. Shareholders will be paid only if anything is left over after paying back the depositors (customers) and bond holders.

Last edited by SmartCat : 6th March 2020 at 16:32.
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Old 6th March 2020, 16:39   #11
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Default re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

This thing with Yes Bank will send my Franklin Credit Risk fund NAV plummeting yet again (with a massive fall having occurred already due the Vodafone-Idea's payment of dues to the DoT). Franklin Templeton Credit Risk Fund has had a steady exposure at 9.5% to Yes Bank for a long time.
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Old 6th March 2020, 17:13   #12
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Default re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

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Originally Posted by sagarpadaki View Post
Sorry to hear about your corpus in YES bank.

I suggest you shift all your funds to nationalized banks even if they offer bit lower interest rate
Yes, I am planning to open an SBI account now.

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Originally Posted by nagr22 View Post
I am in the same boat as you. Made a significant investment after being lured their higher FD rates and now I am stuck. I am hoping that the regulators increase the deposit insurance to 10lakhs from the measly 1 lakh which it is now.
The number is 5 Lakh now, from 4th of February, so there is some comfort.

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Originally Posted by blackwasp View Post
Don't worry, it will be Ok. A close relative had her lifesavings in PMC bank. The amount was supposed to go towards a purchase of a new home. After the initial shock, we proceeded to withdraw whatever we could - there will always be provisions for marriage, education and medical expenses. Though 99% of the corpus is still frozen, we have hopes for a merger with another bank which would make things normal.

As far as the deposit insurance is concerned, it comes into picture only when the bank is merged / amalgamated / liquidated. No relief if in limbo. Thanks to RBI's move to enhance the limit to 5 lakhs, there is some relief. Do read up on the FAQ here.
Thanks, I was somehow under impression that it is still 1Lakh, a simple Google search shows RBI FAQ which also provides one Lakh. http://="https://www.rbi.org.in/comm...Qs.aspx?Id=272


Many of us work for long hours, and the money we have is at the cost of not spending time with loved ones. I was not able to sleep till 5AM yesterday, as all our 6 month salary + additional cushion funds are in Yes Bank. If Yes can go down, anything else can. The Mutual Fund market has been bad, stock market is equally risky. More than beating the inflation, challenge is keeping your money safe. Few friends I spoke with today morning suggested going back to Postal deposit, PPF and other options from previous generation. I am already paying a financial adviser but there is very little I am gaining from this arrangement. We seriously need better financial products and education.

Last edited by BlackPearl : 6th March 2020 at 17:21. Reason: Broken URL tag.
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Old 6th March 2020, 18:39   #13
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Default re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

My salary account is with yes bank and it too had some idle funds lying. Now salary was stopped today as accounts team at my organization is not able to disburse salaries from their Yes bank account.
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Old 6th March 2020, 18:55   #14
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Default re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

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my organization is not able to disburse salaries from their Yes bank account.
Though my salary account is with icici, this is exactly the scenario I was discussing with my colleague today. This is very sad because it not only hurts the employees, it will have a cascading effect on many businesses as they can neither pay their suppliers nor get paid by customers if they are all in yes bank network. If government doesn't fix this mess soon, it will have a huge ripple effect on the economy as Yes bank has deposits worth $28 billion which is huge.
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Old 6th March 2020, 20:22   #15
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Default re: SBI & LIC step in to save Yes Bank; withdrawal cap of Rs 50,000 imposed

Received below email from Yes Bank:
"Funds in excess of Rs 50000 for medical emergency, marriage etc can be considered after RBI approval"

"Prashant Kumar, YES BANK" <info@custcom.yesbank.email>
Fri, 06 Mar 2020 19:58:18

Dear Customer,
The Government of India has made an Order of Moratorium in respect of YES BANK with effect from March 5, 2020, 18:00 hours till April 3, 2020. First and foremost, I would like to apprise you that this is a temporary moratorium made by the Government to protect the interest of the Bank's customers. I wish to reassure you that your deposits are safe with the Bank.

While the withdrawal limit for each depositor has been capped at Rs. 50,000 in aggregate from all accounts, I and the entire team of YES BANK are committed to ensure seamless transactions for customers during the period of moratorium. If you require funds in excess of Rs. 50,000 for medical treatment, marriage, higher education, or any other unavoidable emergency, a provision has been made for consideration up to Rs. 5 Lakh with the approval of the Reserve Bank of India.

A solution is being worked upon to revive the Bank well before the moratorium period of 30 days ends. Please be rest assured that the interest of the customers is the top priority of the Bank. We are working towards ensuring that you can continue to Bank with us with comfort and ease.

I truly value your association with the Bank and look forward to your continued patronage.

Thank you.

Sincerely,

Prashant Kumar
Administrator - YES BANK
(Appointed by the Reserve Bank of India

Last edited by BlackPearl : 6th March 2020 at 21:18. Reason: Typo
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