March 5, 2020 / 5:32 PM / a month ago

UPDATE 5-India places troubled lender Yes Bank under moratorium, takes over from board

* Lender placed under moratorium till April 3 in absence of revival plan - cenbank

* Withdrawals limited to 50,000 rupees

* Cenbank says no need to panic, will work on revival plan (Recasts)

By Manoj Kumar and Nupur Anand

NEW DELHI/MUMBAI, March 5 (Reuters) - India on Thursday placed its fifth-largest private sector lender Yes Bank under a moratorium, with the central bank taking over from its board for 30 days, and imposed limits on withdrawals to protect depositors.

The central bank said the move was necessary because of a serious deterioration in the lender’s financial position and that it would swiftly work on a revival plan.

The drastic measure, after financial markets had closed, came amid discussion at the board of India’ top lender, State Bank of India, which agreed on Thursday to conduct a viability assessment into buying a stake in Yes Bank, a source said.

But the Reserve Bank of India (RBI), late on Thursday, said that it had been left with no option but to ask the federal government to impose a moratorium, assuring depositors that there was no need to panic.

“The financial position of Yes Bank ... has undergone a steady decline largely due to inability of the bank to raise capital to address potential loan losses and resultant downgrades,” the RBI said in a statement.

In a notification ordering the moratorium, the government said that all actions and proceedings against the bank would be stayed and capped most withdrawals at 50,000 rupees ($680) until Apr. 3.

The government also ordered the bank not to pay more than 50,000 rupees to most creditors.

Yes Bank has struggled to raise capital it needs to stay above regulatory requirements as it battles high levels of bad loans.

It has been trying to raise $2 billion in fresh capital since late last year, and in February delayed its December-quarter results.

In January, the bank said it had rejected a $1.2 billion investment offer from Canadian investor Erwin Singh Braich and Hong Kong-based SPGP Holdings - an offer about which many analysts had expressed doubt.

Yes Bank shares surged more than 25% after reports emerged that a group led by SBI would inject capital into the bank.

SBI had been authorised to pick other members of the consortium in the plan approved by the Indian government, Bloomberg reported, citing people with knowledge of the matter.

“The board has recommended to undertake a viability study before taking a decision on Yes Bank,” the source, who attended the board meeting, told Reuters.

Two senior finance ministry officials, directly involved in the matter, said “the commercial decision would be taken by the SBI board” and different options were on the table.

“We have not so far received the proposal from the SBI,” one of the finance ministry officials, who declined to be named as the discussions were private, told reporters.

SBI shares fell as much as 5.4% on the report, before reversing course to close 1% higher. ($1 = 73.5020 Indian rupees) (Reporting by Devjyot Ghoshal, Manoj Kumar and Rupam Jain in New Delhi, Chris Thomas in Bengaluru, and Nupur Anand in Mumbai; Editing by Sriraj Kalluvila, Emelia Sithole-Matarise and Nick Macfie)

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