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Cabinet clears Yes Bank rescue plan; ICICI, Axis, Kotak, HDFC to pitch in
Photo Credit: Reuters

The Union Cabinet has approved a reconstruction plan for Yes Bank, finance minister Nirmala Sitharaman said on Friday, as the government attempts to avoid a wider banking crisis after the collapse of the private-sector lender.

The rescue plan involves State Bank of India, the nation’s biggest lender, taking a 49% stake in Yes Bank, Sitharaman told reporters after a cabinet meeting.

The cabinet decision comes after the Reserve Bank of India (RBI) imposed a moratorium on Yes Bank, superseded its board and appointed former SBI chief financial officer Prashant Kumar as administrator earlier this month. The banking regulator also capped the withdrawal of deposits from Yes Bank to Rs 50,000 till April 3.

SBI had said on Thursday it would inject 7,250 crore ($975 million) into Yes Bank.

On Friday, ICICI Bank, Axis Bank, Kotak Mahindra Bank, Bandhan Bank and mortgage lender HDFC Ltd said they would also pitch in.

ICICI Bank said in a stock-exchange filing its board has approved an investment of Rs 1,000 crore (around $135 million) in the capital-starved lender. This investment is likely to result in over 5% stake in Yes Bank, ICICI Bank said.

HDFC, the country’s biggest housing finance company, will also invest Rs 1,000 crore in Yes Bank.

Axis Bank—the third-largest bank in the private sector—will contribute Rs 600 crore while Kotak Mahindra Bank—the fourth-largest—will pump Rs 500 crore into Yes Bank.

Kolkata-based private-sector lender Bandhan Bank said it will invest Rs 300 crore in Yes Bank.

There will be a three-year lock-in for all investors, Sitharaman said, adding that the lock-in period for SBI would be only for the 26% of the shareholding.

Other investors are also being invited for Yes Bank's reconstruction plan.

According to a Mint report citing people in the know, DMart founder Radhakishan Damani, ace investor Rakesh Jhunjhunwala and the Azim Premji Trust will also chip in. The total investment in Yes Bank by all the investors, including SBI, will be Rs 12,000 crore, the report said.

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