Yes Bank Rescue Plan: How Are Leading Indian Banks Helping?

On Friday, Finance Minister Nirmala Sitharaman informed that the Union Cabinet had approved the "Yes Bank Limited Reconstruction Scheme 2020." The government also issued a Gazette Notification on Saturday that said that the moratorium placed on the private bank would be lifted at 6 pm on 18 March.

Along with the State Bank of India (SBI), other major banks have come forward as investors for the reconstruction of Yes Bank.

According to the approved scheme, the authorised capital of the reconstructed bank will stand altered to Rs 6,200 crore and the number of equity shares to 3,000 crore of Rs 2 each.

Major Investors

As per SBI's statement earlier this week, it will invest Rs 7,250 crore for 725 crore shares at the rate of Rs 10 per share. The scheme requires the public sector bank to not reduce its stake below 26 percent or exceed 49 percent in the reconstructed Yes Bank for a period of 3 years from the date of allotment of shares.

Kotak Mahindra Bank on Friday said that its board has approved a capital infusion of Rs 500 to acquire 50 crore equity shares at Rs 10 per share in Yes Bank.

ICICI Bank will be acquiring 5 percent stake with an investment of Rs 1,000 crore to acquire 100 crore equity shares at Rs 10 per share.

Housing Development Finance Corporation (HDFC) said that it will be investing in 100 crore equity shares for a consideration of Rs 10 with Rs 1,000 crore. It will also result in 5 percent shareholding in the reconstructed Yes Bank.

Axis Bank's board has approved an investment of Rs 600 crore to purchase 60 crore equity shares of Yes Bank at Rs 10 per share (including premium).

Bandhan Bank said that it will be investing in 30 crore equity share for an aggregate consideration of Rs 300 crore at Rs 10 each.

Federal Bank will subscribe to 30 crore equity shares for an investment of Rs 300 crore.

As per the scheme, the reconstructed Yes Bank will allot the equity within two working days following the commencement of the scheme.

SBI and other investors who have subscribed to the shares of the reconstructed bank under this scheme will not be liable to pay capital gains tax for any deemed profits or gains on account of such subscriptions.

Lock-in period

Apart from SBI, the reconstruction scheme has prescribed a lock-in period of 3 years has also been allotted for investors who hold 100 shares or more in the private lender to the extent of 75 percent of their holdings. This means that the lock-in period will apply to all the major banks that have come forward to infuse capital in Yes Bank.

Voting Rights

The government also said an investor, other than SBI, may exercise voting rights to the extent of its shareholding or maximum nine percent of the total voting rights of all the shareholders of the reconstructed bank or as decided by RBI, whichever is lower.

Board of Directors

The scheme says that the office of the administrator of the reconstructed bank, which was appointed by the RBI, will stand vacated immediately after seven calendar days from the date of cessation of the moratorium and a new Board of Directors will be constituted that includes:

• Prashant Kumar, the former chief financial officer and deputy managing director of SBI as the chief executive officer (CEO) and managing director (MD)
• Sunil Mehta, former non-executive chairman of Punjab National Bank as non-executive chairman
• Mahesh Krishnamurthy as a non-executive director
• Atul Bheda as a non-executive director

SBI, as the investor bank, will also nominate two additional officers as Directors. RBI may appoint one or more persons as additional directors if it considers necessary.

Any investor who is permitted to have a voting right of fifteen percent shall have the right to nominate one director on the board, the scheme said.