Yes Bank: Lock-in Applicable to Buyers, Who Purchased Shares before Reconstruction Scheme
The department of financial services under the ministry of finance has clarified that settlement in cash transactions before commencement of the Yes Bank Reconstruction Scheme will take place without the lock-in period. However, the lock-in period will be applicable to buyers of such shares.
In a release the ministry says, “In respect of all cash transactions entered into by the existing shareholders before the commencement of the scheme, settlement will happen without the application of the lock-in period, subject to the condition that the shares so acquired shall be deemed to be part of the shareholding of the buyer and the lock-in period will apply to the shareholding of the buyer. Accordingly, if X has sold 1000 shares to Y before commencement of the Scheme, X shall deliver 1000 shares to Y on settlement date. The lock-in as per para 3(8) will then apply to Y.”
Last week, the government has notified the reconstruction scheme for cash-strapped Yes Bank, paving the way for the lender to resume full operations.
The private sector bank has been put under a moratorium by the Reserve Bank of India (RBI) since 5th March which has restricted deposit withdrawals. Under the terms of the notified scheme, this moratorium will now be lifted at 6pm on 18 March 2020.
According to the government notification, Yes Bank's authorised share capital will be revised upwards to Rs6,200 crore from Rs1,100 crore. The number of total shares of Yes Bank will stand altered to 3,000 crore valued at Rs2 each aggregating Rs6,000 crore. Authorised preference share capital of the lender would continue to be Rs200 crore.
The investor bank which, in Yes Bank's case, is the State Bank of India (SBI), will pick up to 49% of the equity, while private investors will be allowed to buy the rest. SBI will have to hold at least 26% stake in the private bank for a minimum period of three years.
Last week, SBI's board had approved an investment of Rs7,250 crore in Yes Bank by purchasing 725 crore equity shares.
Then on Friday, ICICI Bank and Housing Development Finance Corporation Ltd (HDFC) announced that they will be investing Rs1,000 crore each in Yes Bank's equity. Axis Bank and Kotak Mahindra Bank will be investing Rs600 crore and Rs500 crore, respectively. Bandhan Bank and Federal Bank will be investing Rs300 crore each in Yes Bank.