When Reserve Bank of India (RBI) imposed a moratorium on Yes Bank, restricting aggregate withdrawal to ₹50,000 until 3 April 2020, many compared it with the Punjab and Maharashtra Co-operative (PMC) Bank failure. But if you look at RBI and finance ministry’s announcements, the two have taken measures keeping small depositor’s interest in mind.
Many banking experts feel that there will also be a quick solution to the Yes Bank crisis soon. “The government and RBI should work out a solution soon. The situation of PMC Bank and Yes Bank are different and not comparable. The government cannot afford to let such a large bank fail," said Harsh Roongta, a Mumbai-based Sebi-registered financial adviser and a former banker.
PMC Bank had deposits of over ₹11,000 crore whereas Yes Bank has deposits of over ₹2 lakh crore.
Experts also pointed out State Bank of India’s (SBI) communication to the stock exchanges. The country’s largest bank said that during the meeting of the Central Board of the bank on 5 March, an in-principle approval has been given by the Board to explore investment opportunity in Yes Bank.
According to Roongta, after the revision of insurance limit on deposits of banks in the recent Budget, the definition of small depositor is now those with ₹5 lakh in the bank. “These small depositors should not worry or act in desperation. Based on the developments, there should be a rescue plan for small depositors," said Roongta. He also pointed out that there is uncertainty on what would happen to large depositors who holds over ₹5 lakh with the bank.
When the government restricted withdrawal to ₹50,000 in the bank, it also said higher withdrawal is possible for depositors in case of emergencies. “The Reserve Bank may by a general or special order, permit the said banking company to allow payment to its depositors an amount in excess of ₹50,000 to meet unforeseen expenses," said the finance ministry’s notification.
Depositors can withdraw higher amount in connection with medical treatment or dependents; for cost of higher education of self or dependent; to pay obligatory expenses in connection with marriage or other ceremonies; and in any other unavoidable emergency.
These measures are far different than what happen in case of PMC Bank where depositors had no provision to withdraw higher amount than what RBI notified from time to time. There were even a few deaths that happened as depositors could not withdraw more than the notified amount for even their medical treatment.
For now, it’s best that small depositors should wait for the RBI’s announcement on the rescue of Yes Bank.