YES Bank RBI-Mandated Lock-in Ends Today— Key Points For Retail Investors

Investors were barred from selling shares acquired in Yes Bank in the secondary market for three years. Additionally, SBI had to hold at least a 26 per cent stake in the bank till March 2023. 

The Reserve Bank-mandated three-year lock-in period of YES Bank shares for individual investors and exchange-traded funds is ending on Monday. Analysts have predicted YES Bank shares to remain volatile as the lock-in period ends today. In 2020, the Reserve Bank of India (RBI) superseded YES Bank’s board as a result of its deteriorating asset quality, inadequate capital and losses on its books. At that time, a consortium led by the State Bank of India (SBI), infused Rs 10,000 crore of capital to bail out Yes Bank. However, the beleaguered lender’s reconstruction plan mandated 75 per cent of the bank’s equity remain under a three-year lock-in.

Here's what retail investors should know

Under the reconstruction scheme 2020, a lock-in period was imposed for all investors till March 2023. Investors were barred from selling shares acquired in YES Bank in the secondary market for three years. Moreover, SBI had to hold at least a 26 per cent stake in the bank till March 2023. 

Nine banks led by State Bank, which picked up almost 49 per cent of the stocks in March 2020 for Rs10 per share at a premium of Rs8 on the face value as part of the RBI bailout.

These nine financial entities had infused Rs10,000 crore in Yes Bank Under. The RBI's rescue plan mandated these entities to hold 75 per cent of their shares bought for three years.

As of December 2022, SBI held 26.14 per cent or 6,050 million shares of Yes Bank; HDFC & HDFC Bank and ICICI Bank held 1,000 million shares each; Axis Bank 600 million; Kotak Mahindra Bank 500 million; Federal Bank and Bandhan Bank 300 million each and IDFC First Bank held 250 million shares before it went bust on March 5, 2020.

These eight banks originally held almost 11 billion shares in the bank. That apart, SBI AMC holds 23.67 million of Yes Bank shares in its Nifty 50 ETF, Kotak AMC holds 11.99 million, Nippon India has 10.56 million, SBI ETF of Bank Nifty has another 6.72 million and UTI AMC holds 5.89 million.

Under the lock-in period, as much as 1.35 billion shares are with individual investors. This includes retail, HNIs and NRIs, and another 67 million with exchange-traded funds.

Even since the crisis, the stock has been trailing and closed at ₹16.50 on BSE, down 0.3 per cent last Friday. But this is nearly a 65 per cent premium over their buy value.

On March 5, 2020, the central bank took over YES Bank, and sold to a consortium of banks after a dramatic rise in toxic assets, which jumped to over 26 per cent.

YES Bank has also been profitable from the third quarter since the rescue. Its loan book grew 10 per cent growth in Q3 FY23, and deposits are also expanding at a reasonable pace.

However, developments on the bank’s decision to write-down additional tier-1 (AT-1) bonds is a key near-term risk for the bank’s stock, say analysts.  The rescue plan has called for writing off the AT-1 bonds, but a group of investors in these bonds have challenged this in the courts, alleging mis-selling by the bank.

(With inputs from PTI)