State Bank of India on Friday stated that it will own 49 per cent of stake of crashed Yes Bank. The step by the SBI was heroic for a damsel in distress like 'Yes Bank'. However, how will it affect the account holders of Yes Bank?
-The first thing is not to panic and go by the rumours.
-There will be no amendments in any conditions related to a home loan, personal loan or car loan or credit card dues of customers.
-Yes Bank customers will have to continue making EMI payments as per existing terms
-However, all depositors can expect interest to grow on their deposits as per current interest rates.
-All schemes, contracts, deeds, bonds, agreements, powers of attorney, grants of legal representation and other instruments shall be effective to the extent and in the same manner.
-Legal contracts related to Yes Bank won't be affected by the ongoing crisis.
-No account holder will receive any compensation from Yes Bank on account of changes due to the scheme. Any changes in interest charges or rates, credit card rebranding or change of terms, home loan change of terms, etc won't be liable for compensation.
-The scheme will not impact any action, suit, appeal or any proceeding of whatever nature pending. Recovery certificate obtained by or against Yes Bank will also not be affected.
-Branches and offices will function in the same manner and the same places. RBI might open new offices or branches.
REASON OF CRASH
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The financial position of Yes Bank has undergone a steady decline over the last few years because of its inability to raise capital to address potential loan losses and resultant downgrades, triggering invocation of bond covenants by investors, and withdrawal of deposits. The bank was making losses and inadequate profits in the last four quarters.
The bank has also experienced serious governance issues and practices in recent years which have led to a steady decline of the bank. Take, for instance, the bank under-reported NPAs to the tune of Rs 3,277 crore in 2018-19. That was prompted RBI to dispatch R Gandhi, a former Deputy Governor, to the board of the bank.
The bank was facing regular outflow of liquidity. It means that the bank was witnessing withdrawal of deposits from customers. The bank had the deposit book of Rs 2.09 lakh crore at the end of September 2019.