The government of India placed private lender Yes Bank under moratorium on Thursday and capped withdrawals for a month at Rs 50,000 per depositor. A moratorium is a freeze on the activities of the bank.
Meanwhile, concerned with the steady decline in its financial position, the Reserve Bank of India superseded the board of Yes Bank and appointed Former SBI CFO Prashant Kumar as administrator for the bank.
Yes Bank depositors can now only withdraw Rs 50,000 starting today and until April 3. This is an aggregate amount across all bank accounts - savings, deposits, current accounts. This is the limit for more than one account buy the same person.
— Monika Halan (@monikahalan) March 5, 2020
What are the restrictions on depositors?
A depositor cannot withdraw more than Rs 50,000 from their Yes Bank account till April 3.
This is irrespective of how many accounts you may have with Yes Bank.
If you have any dues payable to the bank, those will be adjusted first before withdrawal of any amount.
This also includes all online transactions and payments. In essence, you cannot spend more than Rs 50,000 from your Yes Bank account till April 3.
Yes Bank also cannot make any investments, payments or transfer properties
RBI has only allowed it to pay bills already received, pay salaries of employees, rent and taxes.
Exceptions:
There are certain exceptions to this limit for which you can apply for RBI approval and get up to Rs 5 lakh. The exceptions are
- Medical emergencies or treatment costs for you or anyone dependent on you
- To pay for higher education for you or someone dependent on you in India or outside
- For marriage and related ceremonies where you have obligatory payments and expenses
- Any other unforeseen emergencies
Why did the government and RBI do this?
Yes Bank's current condition is a result of a series of bad credit decisions. Yes Bank has been struggling to raise funds to stay afloat after the bank had been grappling with mounting bad loans.
But with the bank failing to find an investor, its financial position was declining, especially with outflow of liquidity and account holders withdrawing their deposits. This was leading to further losses mounting for the bank
While RBI put a revival plan in place for Yes Bank, it needed to put a moratorium in place to keep the financial health of the bank declining further.
According to experts, this is a temporary, yet important move by the RBI to safeguard depositors.
Is your money safe?
The moratorium by the government is only a precautionary measure while the government and RBI come up with a resolution plan for Yes Bank.
RBI has told depositors that their interest will be fully protected and there is no need to panic.
It plans to put in a reconstruction plan for the bank before this 30-day period ends.
What can depositors do?
As per experts, there isn’t much you can do except withdraw Rs 50,000. However, it is recommended to transfer this Rs 50,000 to a different bank account just to be safe. A decision about what to do with the rest of the money you have in the bank can be taken after April 3.
Keep an eye out for further steps taken by RBI.