Here is all you need to know about the Yes Bank moratorium

RBI Governor Shaktikanta Das reiterated that a solution will be found 'very shortly,' and that the 30-day moratorium imposed by the central government was the outer time limit.
Customers gather inside the YES bank branch at Janpath in New Delhi. (Photo| Parveen Negi, EPS)
Customers gather inside the YES bank branch at Janpath in New Delhi. (Photo| Parveen Negi, EPS)

On Thursday, the RBI effectively took control of Yes Bank and appointed an administrator from SBI to overlook operations. The central bank also assured depositors not to panic as the banking regulator along with the central government has been preparing a rescue plan, which is expected to be announced soon.

On Friday, RBI Governor Shaktikanta Das reiterated that a solution will be found 'very shortly,' and that the 30-day moratorium imposed by the central government was the outer time limit which means that the central bank hopes to resolve the crisis in less than a month. Here are a few things you should know.

What's a moratorium? 

It means the bank's normal operations including lending and deposit mobilization are restricted. Under Section 45 of the Banking Regulation Act 1949, the one-month moratorium imposed on Yes Bank came into effect from March 5 and will be on till April, 6. During this period, deposit withdrawals are capped, while the bank cannot give fresh loans or renew existing loans besides others.  

If you are a depositor: 

Starting Friday till April 6, you can withdraw only Rs 50,000 even if you have multiple accounts with the bank. However, you can draw up to Rs 5 lakh in case of medical emergencies or unavoidable circumstances such as payment for marriages, higher education etc.

What happens to digital transactions?

Unfortunately, the National Payments Corporation of India (NPCI) has unplugged Yes Bank from its payments networks. It means the bank's 8.27 lakh credit cardholders and over 28 lakh debit cardholders won't be able to make any electronic transactions until further notice. This is a significant blow to customers. Worse, they won't be able to transact even at the point of sale terminals. Ubiquitous digital transactions including paying while dining out or purchasing groceries aren't allowed until further instructions.

Yes Bank was the UPI partner for about 20 apps such as Phonepe, Swiggy etc and accounted for 40 per cent of UPI transactions in January 2020. In absolute numbers, it stood at 514 million transactions, out of the total 1.31 billion transactions.

Users can, however, use Google Pay and Paytm Payments Bank to execute digital transactions.

What happens with your money? 

Though there are limits on withdrawals, there's no need to panic as depositors' money will be safe. In any case, deposits are guaranteed under the Deposit Insurance and Credit Guarantee Corporation (DICGC) to the tune of Rs 5 lakh including interest per account.

However, this will come into effect only if a bank fails, and as things stand now, both the government and the RBI have given repeated assurances that no Indian bank will be allowed to fail under their watch. "The RBI assures the depositors of the bank that their interest be fully protected and there is no need to panic," the central bank said in a statement on Thursday.

It further added, "In terms of the provisions of the Banking Regulation Act, the Reserve Bank will explore and draw up a scheme in the next few days for the bank's reconstruction or amalgamation and with the approval of the central government, put the same place well before the period of moratorium of 30 days ends so that the depositors are not put to hardship for a long period of time."

For account holders

If you use an Yes Bank account to make monthly EMIs on home, auto or any other loans, or use it for SIP or mutual fund investments, paying insurance premiums and other utility bills such as electricity bills and others, it's time to make essential changes.

First inform the receiving party, which could be a bank, mutual fund house, insurer, broker and others to redirect your accounts to any other existing bank.

In some cases where you have given standing instructions for periodic payments such as auto renewal for your DTH service provider, you can terminate the ECS facility or electronic clearance service immediately.

Similarly, accounts linked to payments for SIPs, or to receive redemption or dividend proceeds from mutual funds, most of the fund houses were rather quick to react offering customers an option to switch to other bank accounts.

What's the way forward? 

Clearly, as RBI said, the bank will undergo a reconstruction scheme or will be amalgamated with another bank. As we speak, the country's largest lender SBI is studying the prospects of investing in Yes Bank. In a board meeting held Thursday, SBI said its board gave an in-principle approval to look at investment opportunity in Yes Bank. 

Why is Yes Bank important? 

It's the country's fourth largest private sector lender and has a sizeable retail franchisee. According to RBI data, Yes bank has 28 lakh debit cards holders and has deposits in excess of Rs 2 lakh crore. As on September 2019, deposits of retail and small business customers stood at Rs 80,000 crore.

Of this, 7 per cent or Rs 5,400 crore worth deposits are linked to a salary or savings account. The remaining Rs 75,000 crore comprise savings and fixed deposits.

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