RBI announces Scheme of Reconstruction for YES bank

The Yes Bank Ltd. was placed under an order of moratorium on March 5, 2020 which will be effective up to April 3, 2020.In this regard, RBI published a draft scheme of reconstruction of the Yes Bank Ltd.in public domain inviting suggestions and comments from the public as well as all the stake holders of the bank.  The ‘draft scheme of reconstruction’ is also sent to State Bank of India and Yes bank for their comments, as SBI has expressed its willingness to participate in the reconstruction scheme and make an investment in Yes Bank Ltd. The suggestions and comments will be received by Reserve Bank of India up to Monday, March 9, 2020, and soon after RBI will take its final view on the subject.

According to the draft scheme, the  Investor bank  shall agree to invest in the equity of the Reconstructed bank to the extent that post- infusion it holds 49% shareholding in the Reconstructed bank at a price not less than Rs.10/- (Rupees ten only) [Face value of Rs.2/- (Rupees two only) and premium of Rs.8/- (Rupees eight only)]. The Investor bank shall not reduce its holding below 26% before completion of three years from the date of infusion of the capital. The investor bank shall have two nominee directors appointed on the Board of the Reconstructed Bank (Yes Bank).

The account holders of the bank shall not 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. The scheme does not alter any cause of action accrued, suit, appeal or other proceedings of whatever nature pending, and decree or recovery certificate obtained by or against the ‘Reconstructed bank’.

The scheme does affect the continuation of the services of the employees. All the employees would continue to enjoy 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. However, the Board of Directors of the reconstructed bank has the freedom to discontinue the services of the Key Managerial Personnel (KMPs) at any point of time after following the due procedure.

The scheme does not affect the functions of branches and offices of the bank. All the existing offices and branches of the 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. However, it is 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.

Source: RBI Press Release: 2019-2020/2028