ICICI Bank in India has announced it will initiate a rescue deal with Yes Bank to the tune of up to 10 billion rupees ($135 million), according to Reuters.
Yes Bank is India’s fifth-largest private bank. Amid concerns about its failing financial situation, the country recently placed it under a moratorium and seized control.
ICICI said it would purchase 10 billion shares of the struggling bank at 10 rupees a share, and that it would hold about a 5 percent stake.
The plan to save the bank involves the State Bank of India, along with a group of other investors, purchasing a stake in it.
On March 6, the Reserve Bank of India (RBI) said it had “no alternative” but to rescue the bank and replace its entire board. Yes Bank had been struggling to offload a number of bad loans.
The RBI capped the withdrawal limit at Rs 50,000 ($676) for about a month, which caused people to rush to Yes Bank’s ATMs and withdraw cash.
“There is no need to panic,” the central bank said in a statement. “The Reserve Bank assures the depositors of the bank that their interest will be fully protected.”
RBI-appointed Prashant Kumar, ex-CFO of SBI, stepped in to run Yes Bank for the next 30 days.
“Yes Bank is currently in the intensive care unit, and a State Bank capital injection will provide much-needed oxygen,” said Kranthi Bathini, a director at WealthMills Securities Ltd.
Investors are worried that the Yes Bank crisis could potentially affect the country’s financial system as a whole, and they aim to fix the problem before that occurs.
“It will be done very swiftly; it will be done very fast,” RBI Governor Shaktikanta Das told The Times of India about the rescue plan at the time. “Let me assure you, the Indian banking sector continues to be sound and safe.”
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