It is possible that the Reserve Bank of India (RBI)-appointed administrator for Yes Bank may recommend a higher withdrawal limit from the current Rs 50,000. The RBI has taken the first step of assessing the bank's correct financial, liquidity and solvency position by appointing an administrator. Last year, the RBI didn't renew the term of the MD & CEO Rana Kapoor, who was also the co-founder of the bank, because of governance and other issues. The RBI had also dispatched its former Deputy Governor R Gandhi to take a stock of the situation at a board level.
If the administrator, who is an independent authority and also a seasoned banker, sees that the bank can service the depositors and there is no further deterioration in its NPA, the deposit limit can be raised even before the one month moratorium period.
Take for instance, in the recent debacle of Punjab & Maharashtra Cooperative Bank (PMC Bank), the RBI had raised the deposit withdrawal limit almost four times in a span of just one month. The initial deposit withdrawal limit of Rs 1,000 per depositor in the last week of September last year was revised in the next two days to Rs 10,000 per depositor.
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After a week, the limit was raised to Rs 25,000 and then to Rs 40,000 and Rs 50,000 in quick succession. The revision in the limit could also have been political because of the state elections in Maharashtra, but the RBI always act based on the recommendations of the administrator.
Experts suggest that a lot depend upon the asset quality and the collateral in the books. Currently, a substantial part of the Yes Bank's loan portfolio in sectors like engineering, steel, construction and power, is without sufficient guarantee and lien.
As per its disclosure statement till September 2019, the bank's total loan exposure of Rs 3.79 lakh crore (which includes both fund-based and non-fund based) has a guarantee and lien cover of less than 4 per cent.
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Similarly, the fund based exposure of Rs 2.91 lakh crore has a guarantee plus lien of only Rs 4,953 crore, which comes out to be meagre 1.69 per cent of the total fund-based exposure. In case of non-fund based exposure of Rs 87,682 crore, the guarantee and lien support is for Rs 9,022 crore, representing about 10.28 per cent.
The sector with big exposure includes engineering, steel, construction and power. The engineering sector has an outstanding exposure of Rs 10,366 crore, steel has Rs 10,810 crore, construction has Rs 35,218 crore and power has Rs 21,710 crore. The maximum pain is coming from these troubled sectors especially construction where the bank has a large fund and non-fund based exposure.
The administrator will have a tough task of finding out the collateral value and also the position of these companies. The bank was facing a gradual withdrawal of deposits from the customers. The fund gave support to the deposit base as the money from the depositors is used for lending.
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