The Reserve Bank of India said Thursday that it had taken over Yes Bank, citing a “serious deterioration” in its financial position. The central bank said it had to act quickly to restore the confidence of Yes Bank’s customers, who had been withdrawing their deposits.
Shares of Yes Bank, which describes itself as India’s fourth largest private lender, collapsed following the announcement. The company’s stock fell 56%.
The RBI announced a draft revival plan for Yes Bank on Friday that involves the government-owned State Bank of India — the country’s biggest lender — taking a 49% stake.
Domestic demand in India has slowed sharply due to stress in its financial sector and lower credit growth. The RBI said Yes Bank was unable to raise the capital needed to cover “potential loan losses and resultant downgrades.”
Bad debt posed a risk to India’s economy even before the coronavirus outbreak hit, and those problems could now pile up given the expected slump in growth.
— Rishi Iyengar contributed to this article.