NEW DELHI (AP) — India’s finance minister assured panicky depositors Friday that their money is safe after the central bank took control of cash-strapped private Yes Bank while working on a rescue plan.
Thousands of depositors rushed to withdraw money from Yes Bank, India’s fifth largest private sector lender, as the Reserve Bank of India capped such withdrawals at 50,000 rupees ($695) per account per month. Some additional withdrawals will be allowed for emergencies, it said.
Yes Bank’s shares came under massive selling pressure and plunged as much as 85% on Friday.
Depositors faced a similar situation at Mumbai-based Punjab and Maharashtra Cooperative Bank in September, when the federal bank placed curbs on its transactions for six months.
India’s economy has slowed, with annual growth dropping to below 5% after years of much better performance. That has added to strains on the financial sector.
The RBI said Thursday it took over the bank’s board for 30 days and imposed limits on withdrawals due to the parlous state of its finances.
The central bank has a strong grasp of the situation and has promised a quick resolution of the crisis, said Finance Minister Nirmala Sitharaman. “I want to assure every depositor that their money shall be safe. Their monies are safe,” she told reporters.
India’s largest lender, the state-run State Bank of India, gave an “in-principle” approval to invest in capital-starved Yes Bank.
Former Finance Minister P. Chidambaram, an opposition Congress party leader, hit out at the government, saying the situation shows it is failing to govern and regulate financial institutions effectively.