Indian banks on an average are 'well-capitalised', says India's chief economic adviser.However,Since the Enforcement Directorate sleuths raided Rana Kapoor's home in Samudra Mahal residence Worli and arrested him. Account holder are worried about their amounts.
Resident and non-resident (NRI) depositors of cash-strapped Yes Bank have been assured by a top government economist that there is no reason to worry as India's banks have adequate capital.
Chief Economic Adviser (CEA) Krishnamurthy Subramanian on Sunday sought to allay fears of both depositors and investors of the crisis-ridden bank, asserting that Indian banks on an average are "well-capitalised".
The CEA's assurance came as India's leading lender, State Bank of India, said it would unveil a rescue plan for Yes Bank on Monday.
"Together with the fact that our banks are well-capitalised and the fact that the deposits are well taken care of, there is absolutely no reason for anyone to worry," Subramanian said.
He also noted that ratio of deposit to market capitalisaion is not the correct instrument for assessing the safety of banks. Instead, the capital-to-risk (weighted) assets ratio should be gauged.
Earlier, Finance Minister Nirmala Sitharaman had also assured that depositor money would be safe. "I want to assure every depositor that their money shall be safe. Their money is safe," she said.
"I am constantly in contact with the RBI and the steps that are taken are taken in the interest of depositors, banks, and economy. We are fully seized of the development."
Investors and stakeholders in Indian financial markets have been concerned after the Reserve Bank of India on Thursday placed Yes Bank under a moratorium for 30 days and capped the withdrawal limit at ?50,000 because of deteriorating financial health of the private lender.
SBI chief Rajnish Kumar said the lender may or may not pick the entire 49 per cent in the embattled Yes Bank. Like in the cases of PMC and DHFL, the RBI has superseded the Yes Bank board for a period of 30 days and placed some stiff restrictions on the bank.
The restriction on withdrawals from capital-starved bank will remain in place until April 3, and during this period Yes Bank cannot make in aggregate payment to a depositor of a sum exceeding Rs50,000 lying to his/ger credit in any savings, current or any other deposit account. The RBI, however, said it may allow a payment of over Rs50,000 to Yes Bank depositors an amount in excess of Rs50,000 like expenses for medical treatment, marriage and education.
As part of the probe, the Enforcement Directorate sleuths raided Kapoor's home in Samudra Mahal residence Worli.
After two days of grilling, Yes Bank founder Rana Kapoor, one of India's most high profile bankers, was arrested by the Enforcement Directorate (ED) on Sunday, March 8 in a money laundering case.
A senior ED official told IANS: "Yes, we have arrested Kapoor in a money laundering case."
Kapoor has been booked under the Prevention of Money Laundering Act (PMLA) and other offences days after the Yes Bank crisis erupted.
The arrest came after Kapoor had been grilled since Friday night for his and his family's links with the stressed-and-controversial realty firm Dewan Housing Finance Corporation Ltd (DHFL).
A co-founder of Yes Bank in 2003-2004, Kapoor later became its MD and CEO but the banking mogul was forced to exit it in September, 2018.
As part of the probe, ED sleuths raided Kapoor's home in Samudra Mahal residence Worli.
The ED on Saturday, March 7, also carried out searches at the residence of Kapoor's three daughters of at in Mumbai and New Delhi.
The three daughters-Rakhee Kapoor Tandon, Roshni Kapoor and Radha Kapoor, were the alleged beneficiaries of the scam.
The ED suspects that Kapoor and two of his daughters, who are directors with Doit Urban Ventures, allegedly received kickbacks from DHFL.
This amount of Rs4,450 crore is part of the Rs13,000 crore allegedly siphoned off by DHFL through 79 dummy companies, with Doit Urban Ventures being one of them.
The ED official said during searches a lot of incriminating documents were found and the agency grilled him on his links with DHFL promoters and other companies.
Kapoor's alleged role in the disbursal of loan to a corporate entity and kickbacks reportedly received in his wife's bank account were also under probe.
The ED registered a money laundering case against Kapoor as a continuation of its probe against the DHFL wherein it was allegedly that Rs12,500 crore was diverted to 80 shell companies using one lakh fake borrowers. The transactions with these shell companies were said to date back to 2015.
An ED official said that the probe revealed that funds diverted by the DHFL originated from Yes Bank.
He said that the searches at Kapoor's residence on Friday night were meant to find out any irregularity in grant of loans to the DHFL by the Yes Bank.
The ED has accused Kapil and Dheeraj Wadhawan of DHFL of purchasing shares in five firms-Faith Realtors, Marvel Township, Abe Realty, Poseidon Realty, and Random Realtors-after which they were amalgamated with Sunblink.
The outstanding loans of these five firms, totalling around Rs2,186 crore till July 2019, were allegedly appropriated on to the books of Sunblink to cover up the diversion of loans acquired from DHFL.
The ED's action comes after the RBI superseded Yes Bank Board for 30 days and appointed an administrator, putting a cap of Rs50,000 on withdrawal by account holders for a month.
The RBI said that the bank's board was superseded "owing to serious deterioration in the financial position of the bank".
Former SBI CFO Prashant Kumar was appointed as administrator of Yes Bank, which has over 1,000 branches and 1,800-plus ATMs across the country.
On Thursday, Union Finance Minister Nirmala Sitharaman said that the bank was under watch since 2017 and developments relating to it were monitored on a day-to-day basis.
India laid out a rescue plan for Yes Bank on Friday under which State Bank of India (SBI) will take a 49 per cent stake in the troubled lender, which is struggling with bad loans.
Indian Finance Minister Nirmala Sitharaman said the restructuring plan would be implemented within 30 days, adding the depth of the problems at the bank were still being assessed.
The Reserve Bank of India (RBI) said it had increased Yes Bank's authorised share capital, paving the way for a cash injection after it failed in its months-long attempt to raise enough money to meet regulatory requirements.
Based on details in the RBI's statement, analysts calculated that SBI would invest some Rs25 billion ($339 million).
"The RBI governor has assured that there will be no loss to any Yes Bank depositor," Sitharaman said, adding that the steps taken to take control of the bank is in the interest of depositors, bank and the economy.
"I want to assure every depositor's money is safe, and I'm in constant touch with the RBI," Sitharaman said, adding she herself was monitoring the situation for a couple of months.
Shares in India's Yes Bank plunged 60 per cent on Friday as panicky depositors rushed to withdraw funds after the central bank took control in a dramatic late-night move and limited withdrawals from the troubled lender.
Shares of Yes Bank plunged as much as 85 per cent to wipe out more than $1 billion of market value, marking the biggest intra-day fall in an Indian blue-chip stock. By early afternoon, the stock was down 60 per cent after paring losses.
Many business owners feared the central bank's move would hit their operations too, as the lender, with 1,000 branches across India, has many commercial clients.
"I will struggle to pay salaries to my staff, or pay any of my vendors, because of the restrictions," said Chintan Patel, a building contractor in Ahmedabad.
Many customers took to social media to complain that the bank's online system was down, preventing fund transfers.
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