YES Bank ‘won’t fall off the cliff’, SBI to rescue it with 49% stake

State Bank of India (SBI) will pick up a 49 per cent stake in troubled private lender YES Bank as part of a revival scheme framed by the Reserve Bank of India (RBI) on Friday.

The draft scheme, titled “Yes Bank Ltd. Reconstruction Scheme, 2020”, issued by the RBI, mentioned SBI as the “investor bank” and said it would pay at least Rs 10 per share for buying equity in YES Bank.

The move will lead to a capital infusion of roughly Rs 2,650 crore by SBI, with equity worth Rs 2,450 crore and preferential shares of around Rs 200 crore, an RBI executive said, requesting anonymity.

According to the scheme, YES Bank’s authorised capital will stand at Rs 5,000 crore and the paid-up capital will be Rs 4,800 crore. The country’s largest lender will acquire shares at a price not less than Rs 10 each (face value of Rs 2 and premium of Rs 8), according to the scheme made public by the RBI.

The RBI has invited comments on the draft scheme from members, depositors, or creditors of YES Bank Ltd and will accept them till March 9.

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SBI’s stake, locked in for three years, will “not reduce its holding below 26% before completion of three years from the date of infusion of the capital”.

SBI has asked for a special dispensation from the Securities and Exchange Board of India (Sebi) for its proposed equity infusion in YES Bank.

Sources said SBI Chairman Rajnish Kumar met Sebi chief Ajay Tyagi to discuss the issue. At the meeting, the public sector lender sought exemption from Sebi’s open offer obligations as well the pricing norms.

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Under the Takeover Code regulations, an entity acquiring more than 25 per cent in a listed company has to make an open offer to acquire another 26 per cent stake from minority shareholders.

Also, capital infusion has to be done on the basis of the pricing formula prescribed by Sebi. Under this, the acquisition price has to be either the previous two-week average price or the six-month average price, whichever is higher.

SBI had expressed its willingness to make investment in YES Bank after getting an “in principle” approval from its board on Thursday.

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The RBI, which superseded the board of YES Bank and imposed a 30-day moratorium on it, will appoint a new board of directors. SBI will be allowed to bring in two directors on the board. For at least one year, none of the employees will be terminated and will continue to get the same remuneration with the “same terms and conditions of service, including terms of determination of service and retirement”. However, the board will be free to discontinue the services of key managerial persons at any point of time.

“The RBI has assured it will make the scheme effective within the moratorium period (of 30 days) so that depositors are not troubled for too long … The deposits and liabilities will continue to remain unaffected as before. I know there is a temporary cap but every deposit and liability will be honoured,” Sitharaman said. “I remember I had repeatedly said that I will not allow any institutions to fall off the cliff.”

Earlier on Friday, RBI Governor Shaktikanta Das had said YES Bank’s resolution efforts were aimed at maintaining “stability and resilience” in the Indian financial sector and the difficulties would be overcome “very swiftly.”

Former State Bank of India chief financial officer Prashant Kumar was appointed administrator of YES Bank on Thursday, and each depositor will be able to withdraw up to Rs 50,000 till the moratorium is in place, the RBI said in two official statements.

Draft scheme of reconstruction

• SBI’s stake to be locked in for 3 years from the date of capital infusion

• It can reduce stake to 26% after 3 years

• SBI will infuse around Rs 2,650 crore in YES Bank

• RBI to appoint new board of directors; SBI will have two board members

• Employees’ terms and conditions to remain same for one year