Finance Minister Nirmala Sitharaman said that the Union Cabinet has approved the reconstruction scheme for Yes Bank as proposed by the Reserve Bank of India and the moratorium will be lifted within three days after the notification is issued.
- The finance minister said that SBI will invest up to 49% of the equity in Yes Bank as part of the RBI-supervised ‘Yes Bank Ltd Reconstruction Scheme, 2020’. SBI informed the exchanges that its board had approved a proposal to invest ₹7,250 crores in Yes Bank by purchasing 7,250 million shares at ₹10 apiece.
- According to the proposal, HDFC and ICICI Bank will infuse ₹1,000 crores each, Axis Bank ₹600 crores and Kotak Mahindra Bank (KMB) Ltd ₹500 crores into Yes Bank. The quantum of investment to be made by Life Insurance Corp. of India (LIC) is awaiting the board’s approval.
- Under the new proposed shareholding structure, SBI may hold a 45.74% stake, HDFC Bank and ICICI Bank may hold 6.31% each, and Axis Bank and KMB may hold around 3.5% each.
- Sitharaman also said that other investors will be subject to a three-year lock-in period for 75% of their investment, while for SBI the investment lock-in is unchanged at 26%, as announced in the draft scheme.
Constitution of Board of Directors
- As per the reconstruction plan, Prashant Kumar, the former chief financial officer of SBI who was appointed administrator for Yes Bank last week shall assume the position of managing director and chief executive officer.
- Former non-executive chairman of Punjab National Bank Sunil Mehta will take charge as the non-executive chairman at Yes Bank. Mahesh Krishnamurthy and Atul Bheda will be appointed as non-executive directors on the new Yes Bank board.
- Apart from these members, SBI will have the right to appoint two additional members on Yes Bank’s board. Additionally, RBI will also have the right to appoint one or more directors on the new board. Any investor with 15 percent voting rights shall also be allowed to nominate a director on the bank’s board.
Background
On March 5, the RBI had imposed a moratorium on the country’s fifth-largest private-sector lender, restricting withdrawals to Rs 50,000 per depositor till April 3 following a serious deterioration in the bank’s financial position. The central bank had also superseded the board and placed it under an administrator, Prashant Kumar, who is a former deputy managing director and chief financial officer of SBI.