State Bank of India will be investing Rs 2,450 crore in Yes Bank initially of Rs 10,000 crore committed as a rescue operation, which is believed to be one of the biggest for a private sector commercial bank.
SBI Chairman Rajnish Kumar said, “SBI is a national Institution of India. We’re supporting the government. We believe the survival of bank is a must. The failure of a bank has huge consequences for financial system.”
Reserve Bank of India (RBI) and the government acted promptly to bring a national bank to invest in the troubled mid-sized bank and help it escape the crisis-like situation.
However, the crisis in financial system means depositors will lose trust in the banking system.
About a year ago RBI had shunted out Rana Kapoor, the founder and former CEO of the new generation Yes Bank.
In terms of performance of PSBs the SBI is in better position and it is the largest state-owned bank too. In 2017-18 it made a loss of Rs 6,547 crore, but in the next financial year the bank made a profit of Rs 862.23 crore. The current 2019-20 seems better and by December 2019 the net profit was Rs 10,000.
With the investment in Yes Bank as a rescue operation SBI will come under financial burden.
Currently Yes Bank’s stock is trading at Rs 16 per share, just 0.15 times of its book value. The contribution of SBI to its value will be just Rs 10 per share.
