Yes Bank's head office in Mumbai, India. Photo: Himanshu Bhatt/NurPhoto

Prashant Kumar, the administrator of India’s troubled Yes Bank, said depositors’ money was safe and curbs on withdrawals would be lifted by the end of this week.

Last Thursday, the Reserve Bank of India imposed a moratorium until April 3 on Yes Bank and superseded the board and appointed Kumar as administrator. Depositors were prohibited from withdrawing more than 50,000 rupees (US$675) a month, because of the bank’s weak liquidity and heavy accumulation of bad loans.

The 59-year-old banker said he and his team were working to improve the condition of the bank and the moratorium would be lifted before the deadline and there was no need to panic.

He said the lender had the backing of the central bank and State Bank of India to deal with any flight of deposits. The administrator said he hoped that since the State Bank of India had already agreed to be the equity partner, that would instill confidence among customers.

He said there had been an initial panic by customers when they were unable to withdraw cash from ATMs, but the situation had now stabilized. The bank also announced that the online inward clearing interface has started functioning and those wanting to settle credit card bills and pay loan installments could do so using their other bank accounts.

Focus on retail

As for the future of the bank, Kumar said it would sell its vast portfolio of corporate loans and focus on retail banking – the mainstay of its highly profitable rivals.

The focus on retail banking is the opposite of what the management led by Rana Kapoor had concentrated on and led to the accumulation of non-performing assets or bad debt in its corporate loan portfolio. According to an estimate by JP Morgan, the bad loans in the bank could go as high as 450 billion rupees.

Kumar said the central bank would soon appoint a new board and the plan to convert into a full-fledged retail bank would be placed before the new board. Officials in the corporate loan portfolio section would be asked to focus on recovering old loans instead of disbursing new ones, he said.

The bank would have to be predominantly retail (assets), the share of which should be 60-70%. At present, the share of retail in the loan book is about 30-35% and the rest is corporate. We need to reverse this, Kumar said.

“We are banking on three things to instill confidence in customers. First, the State Bank of India is investing up to 49% of the bank’s equity, which is a big thing. Second is the speed of resolution, which is moving very fast with support from the RBI and SBI. Finally, the bank is firming up capital-raising plans and will announce these soon,” he said.