SBI has also agreed to not to reduce its stake below 26% before the completion three years from the date of capital infusion
Image: Local head office of State Bank of India, Mumbai, India. (Credit: Wikipedia.org/Manjulkumar.)
Indian public sector banking giant State Bank of India (SBI) announced that it will invest INR24.5bn ($330m) in Yes Bank, the private bank which was placed under moratorium by the Reserve Bank of India (RBI).
The stake acquisition move follows after the RBI’s decision to put Yes Bank under a moratorium on the basis that the private banking company failed to increase its capital for addressing possible loan losses.
The country’s apex bank stated that Yes Bank, in recent years, had faced serious governance issues and practices which have resulted in its steady decline.
SBI will not reduce its stake to below 26%
As per RBI, SBI will hold 49% stake in the reconstructed Yes Bank, by paying a price not less than INR10, with a face value of INR2 and a premium of INR8, per share.
SBI has also agreed to not to reduce its stake below 26% before the completion of three years from the date of investment.
The reconstructed Yes Bank will consist of a board with a CEO and managing director, a non-executive chairman and non executive directors. SBI will also have nominee directors appointed on the board of Yes Bank.
The new board members, appointed so will continue to hold their positions for a period of one year or until an alternate board has been constituted by Yes Bank.
SBI said that all the deposits with and liabilities of the reconstructed bank will continue in the same manner.
The bank stated: “All the employees of the Reconstructed bank shall continue in its service with the same remuneration and on the same terms and conditions of service (T&C), at least for a period of one year.
“Board of Directors of the Reconstructed Bank will however, have the freedom to discontinue the services of the Key Managerial Personnel (KMPs) at any point of time after following the due procedure.”