RBI announces Yes Bank reconstruction scheme, SBI to hold 49% equity

Mumbai, March 6, 2020

A day after superseding its Board of Directors, the Reserve Bank of India (RBI) today placed in the public domain a draft scheme of reconstruction of the private sector Yes Bank Ltd, as part of which public sector State Bank of India, the country's largest lender, could take up to 49% shareholding in the reconstructed bank.

SBI's investment in the equity of the bank will be at a price not less than Rs. 10 (Face value of Rs 2 and premium of Rs 8), the Draft "Yes Bank Ltd. Reconstruction Scheme, 2020" said.

It also said the investor bank, SBI, shall not reduce its holding below 26% before completion of three years from the date of infusion of the capital.

The Central Government had placed the embattled Yes Bank under moratorium yesterday, which will be effective up to April 3.

After superseding the bank's Board, the RBI appointed Prashant Kumar, former Deputy Managing Director and CFO of SBI, as the administrator of Yes Bank.

The RBI said the rapidly deteriorating financial position of Yes Bank Ltd. relating to liquidity, capital and other critical parameters, and the absence of any credible plan for infusion of capital had necessitated it to take immediate action in public interest and particularly in the interest of the depositors.

In terms of section 45 of the Banking Regulation Act, 1949 (10 of 1949), during the period of moratorium the Reserve Bank of India may, if so considered necessary in public interest or in the interest of the depositors or to secure the management of the banking company, frame a scheme of reconstruction or amalgamation of the concerned banking company.

"State Bank of India has expressed its willingness to make investment in Yes Bank Ltd. and participate in its reconstruction scheme," RBI said, adding that the scheme was drawn up by it in exercise of the powers conferred by sub-section (4) of section 45 of the Banking Regulation Act, 1949.

The central bank has invited suggestions and comments from members of public, including the banks' shareholders, depositors and creditors on the draft scheme. The draft scheme has also been sent to Yes Bank Ltd. and State Bank of India for their comments.

The suggestions and comments will be received by Reserve Bank of India up to Monday, March 9, 2020. The Reserve Bank will take a final view soon thereafter.

According to the draft scheme, from the Appointed date, in ‘clause V’ of the Memorandum of Association of the Reconstructed bank, the Authorised Capital shall stand altered to Rs 5,000 crore and the number of equity shares will stand altered to 2,400 crore of Rs 2 each, aggregating to Rs 4,800 crore.

From the appointed date, the office of the Administrator of Yes Bank Ltd. appointed by the Reserve Bank shall stand vacated, and a new Board, shall stand constituted.

The Board will consist of a CEO & Managing Director, a Non-Executive Chairman, and two Non-Executive Directors. The investor bank shall have two nominee directors on the Board of the reconstructed bank. RBI may appoint additional directors.

It will be open to the board of directors of Yes Bank Ltd. to co-opt more directors to it, so however that the total membership in the Board, excluding the Additional Directors appointed by the Reserve Bank of India under section 36AB of the Act, shall not exceed the maximum prescribed by the Articles of Association.

The appointment of the directors as above shall have effect, notwithstanding non-fulfilment of requirements as to minimum shareholding, qualification, experience or any other condition precedent, for being a director of the Yes Bank Ltd.

The members of the Board so appointed shall continue in office for a period of one year, or until an alternate Board is constituted by Yes Bank Ltd. through the normal procedure laid down in its Memorandum and Articles of Association, whichever is later.

Any defect in the constitution or any vacancy in the Board shall not invalidate any meetings conducted by the Board or any decision taken by it.

Unless otherwise expressly provided in the Scheme, all contracts, deeds, bonds, agreements, powers of attorney, grants of legal representation and other instruments of whatever nature, subsisting or having effect immediately before the Appointed date, shall be effective to the extent and in the same manner, as was applicable before the Scheme.

It shall not be necessary to obtain the consent of any third party or other person who is a party to any of the aforesaid instruments or arrangements to give effect to them.

All the deposits with and liabilities of the reconstructed bank, except as provided in the scheme, and the rights, liabilities and obligations of its creditors, will continue in the same manner and with the same terms and conditions, completely unaffected by the scheme.

The instruments qualifying as Additional Tier 1 capital, issued by the Yes Bank Ltd. under Basel III framework, shall stand written down permanently, in full, with effect from the Appointed date. This is in conformity with the extant regulations issued by Reserve Bank of India based on the Basel framework.

No accountholder shall be entitled to get any compensation from the reconstructed bank on account of the changes occurred in the reconstructed bank by virtue of the Scheme.

Any cause of action accrued, suit, appeal or other proceeding of whatever nature pending, and decree or recovery certificate obtained by or against the reconstructed bank, will remain unaffected by the scheme.

All the employees of the reconstructed bank shall continue in its service with the same remuneration and on the same terms and conditions of service (T&C), including terms of determination of service and retirement, as were applicable to such employees immediately before the appointed date, at least for a period of one year. Board of Directors of the reconstructed bank will, however, have the freedom to discontinue the services of the Key Managerial Personnel (KMPs) at any point of time after following the due procedure.

The offices and branches of the reconstructed bank shall continue to function in the same manner and at the same places they were functioning prior to the effective date, without in any way being affected by this scheme.

It will be open to the reconstructed bank to open new offices and branches or close down existing offices or branches, in accordance with the extant policy of the Reserve Bank and complying with the necessary terms and conditions.

The reconstructed bank shall submit to the Reserve Bank such statements and information as may be required by the Reserve Bank from time to time, regarding the implementation of the scheme or any other related matter.

The provisions of the scheme shall have effect notwithstanding anything to the contrary contained in any other law or regulations or directions or agreement, award or other instrument for the time being in force.

NNN