The board of the State Bank of India has given an in-principle approval to the lender to explore opportunities to invest in Yes Bank, PTI reported. The decision was taken at a meeting on Thursday, the bank said.
The announcement came hours after the Reserve Bank of India imposed a moratorium on the cash-strapped Yes Bank, and restricted withdrawals at Rs 50,000 for each account. The board of the bank was also superseded with immediate effect, and former State Bank of India Chief Financial Officer Prashant Kumar was appointed administrator for Yes Bank.
“The matter in regard to Yes Bank was discussed at the meeting of the central board of bank on Thursday and an in-principle approval has been given by the board to explore investment opportunity in the bank,” the SBI board said in a filing.
Reports have said that the government has asked the State Bank of India and Life Insurance Corporation to collectively pick up 49% stake in Yes Bank. The government is allegedly considering a bailout because it fears that the collapse of Yes Bank will have a domino effect on the banking sector.
In January, SBI Chairperson Rajnish Kumar had said Yes Bank “will not be allowed to fail” and that solutions will come up to steady the lender. The bank has a strong brand, he had said.
Meanwhile, some reports said that account holders in the bank faced several difficulties soon after the government’s announced on Thursday. Some depositors said they were unable to withdraw cash from ATMs due to long queues or shut down machines, while others complained that they could not access the private lender’s netbanking facility. On Friday morning, the netbanking facility of the website led to a broken page.
“The Reserve Bank came to the conclusion that in the absence of a credible revival plan, and in public interest and the interest of the bank’s depositors, it had no alternative but to apply to the Central Government for imposing a moratorium under section 45 of the Banking Regulation Act, 1949,” a statement from the RBI said. “Accordingly, the Central Government has imposed moratorium effective from today.”
The RBI also assured depositors that their interests will be completely protected and said there was “no need to panic”.