RBI announces reconstruction of Yes Bank; SBI to pool in 49% equity

09 Mar 2020


The Reserve Bank of India on Friday announced a draft scheme of reconstruction of Yes Bank Ltd and placed it on its website for suggestions and comments from members of public, including the banks' shareholders, depositors and creditors. 

The draft scheme has also been sent to Yes Bank Ltd and State Bank of India, the lead investor in the reconstructed bank, for their comments. 
As per the scheme of reconstruction, the authorised share capital of Yes bank will stand altered to Rs5,000 crore and the number of equity shares will stand altered to 24,00,00,00,000 (24,000 million) of Rs2 each aggregating to Rs4,800 crore.
The investor bank (SBI) will invest in the equity of the reconstructed bank to the extent that post infusion it holds 49 per cent shareholding in the reconstructed bank at a price not less than Rs10 for shares of Rs2 face value, at a premium of Rs8. 
A 49 per cent stake in Yes bank would accordingly, cost SBI around Rs24,500 crore. SBI had proposed to invest up to Rs10,000 crore in a reconstructed Yes Bank. It is not yet known where the extra funds will come from.
As per the scheme of reconstruction, the investor bank cannot reduce its holding below 26 per cent before completion of three years from the date of infusion of the capital.
A new board of directors, consisting of a chief executive officer (CEO), a managing director, non-executive chairman and non-executive directors will take over administration of Yes Bank from the RBI-appointed Administrator.
SBI will have two nominee directors on the board of the reconstructed bank, while RBI may appoint additional directors in exercise of the powers conferred on it by the Banking Regulation Act.
The board of directors of the reconstructed Yes Bank Ltd may co-opt more directors. However, the total membership in the board, excluding the additional directors appointed by the RBI, shall not exceed the maximum prescribed by the articles of association.
RBI said the appointment of the new directors will be effective 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.
The reconstructed bank will honour 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, unless otherwise expressly provided in the scheme.
RBI said it will 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 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 Yes Bank will continue in the reconstructed bank with the same remuneration and on the same terms and conditions of service, 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. The 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.
There will also be no change in the offices or branch network of the reconstructed bank. 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.
The reconstructed bank may decide to open new offices and branches or close down existing offices or branches, in accordance with the extant policy of the RBI and complying with the necessary terms and conditions.
The reconstructed bank should submit such statements and information as may be required by the RBI, from time to time, regarding the implementation of the scheme or any other related matter.
It should also advertise any notice or communication, which is of general interest, in addition, in one or more daily newspapers, which may be in circulation at the place where the registered office of the reconstructed bank is situated.
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.
In case of any doubt over the interpretation of the provisions of the scheme, the matter shall be referred to the RBI and its views on the issue shall be final and binding on all concerned.
In case of any difficulty in implementing the scheme, the central government may, in consultation with the RBI, as occasion arises, do anything not inconsistent with the provisions of the scheme, which appears to it as necessary for the purpose of removing the difficulty.
RBI wants a suggestions and comments to be received latest by to Monday (9 March 2020), before taking a final view.

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