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India's central bank moves to rescue major lender
[NEW DELHI] India's central bank on Thursday appointed an administrator for Yes Bank and limited withdrawals in a rare late-night move to help shore up the country's fourth-largest private lender.
The central bank's move came as reports said the State Bank of India, the country's largest lender, and other financial institutions were poised to bail out Yes Bank, which has been struggling with bad loans.
The bank's weakened position was "largely due to inability of the bank to raise capital to address potential loan losses and resultant downgrades," the Reserve Bank of India said in a statement.
"The bank has also experienced serious governance issues and practices in the recent years which have led to a steady decline of the bank."
The central bank limited withdrawals to 50,000 rupees (S$937.70) for the next 30 days and appointed the administrators to replace the bank's board of directors.
"There is no need to panic," the Reserve Bank insisted.
India has been grappling with a liquidity crunch caused by the near-collapse more than a year ago of IL&FS, one of India's biggest shadow banks - finance houses responsible for significant consumer lending.
Yes Bank's total exposure to shadow lenders and developers was 11.5 per cent as of September, Bloomberg News reported.
Depositors who rushed to withdraw their money at ATMs in the financial capital Mumbai late Thursday said they had issues withdrawing cash amid long queues and shuttered machines, the Press Trust of India reported.