Shares in India's Yes Bank plunge over 70% on withdrawal limits

MUMBAI (AFP) – Shares in India’s fourth-largest lender Yes Bank plunged more than 70 per cent on Friday (March 6) after the central bank seized control and imposed withdrawal limits amid widening damage from the country’s shadow banking crisis.

Queues formed outside Yes Bank branches after the announcement late Thursday that customers can only withdraw 50,000 rupees (S$940) over the next 30 days while the Reserve Bank of India (RBI) attempts to put together a rescue.

India has been reeling from a liquidity crunch caused by the near-collapse more than a year ago of IL&FS, one of the nation’s biggest shadow banks – finance houses responsible for significant consumer lending.

A resulting reluctance of banks to lend money has exacerbated the woes of Asia’s third-biggest economy, with growth slowing for seven consecutive quarters before picking up with a meagre 4.7-per cent expansion in the final three months of 2019.

Yes Bank’s exposure to the beleaguered shadow banking sector is particularly large and it has been struggling for some time to raise fresh capital to free itself of a mountain of bad loans in order to quell worries about its viability.

Its weakened position was “largely due to the inability of the bank to raise capital to address potential loan losses and resultant downgrades”, the RBI said on Thursday.

“The bank has also experienced serious governance issues and practices in recent years, which have led to a steady decline of the bank,” it added, but said there was “no need to panic”.

However, customers waiting to get their money were far from reassured.

“It’s not clear at the moment, and that is making some people panic a bit. Even I am at the moment,” Devika, a student and Yes Bank account holder, told AFP as she queued to withdraw money in New Delhi.

“I had purchased 15 shares of Yes Bank at 150 rupees per share and now they are at 15 rupees. It’s a huge dent on my investments and even my deposits are locked in,” Varsha Gandhi, a Mumbai-based lawyer told AFP.

“I am just waiting to see if RBI’s moves will have any positive impact. But it’s a huge loss as the stocks have tanked,” 27-year-old Gandhi added.

RBI governor Shaktikanta Das also tried to reassure account holders on Friday.

“The 30 days which we have given is the outer limit, you will see very swift action from the RBI to put in place a scheme to revive Yes Bank,” he told reporters in the financial capital Mumbai.

According to media reports, the RBI was attempting to cobble together a rescue that included State Bank of India (SBI), the country’s largest lender, and other financial institutions.

By early afternoon in Mumbai, Yes Bank shares had recovered slightly but were still down 59 per cent at 15.20 rupees.

Shares in other Indian financial stocks were also down sharply, with IndusInd Bank off 8.3 per cent and Bajaj Finance losing almost five per cent.

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