The solvency of banks is internationally based on capital to risk-weighted assets: RBI

Two days after the Reserve Bank of India (RBI) proposed a revival plan for Yes Bank, India’s apex monetary regulator on Sunday took to micro-blogging website Twitter to address the concerns raised by several experts. In a tweet sent out at 5:10 pm, RBI said, “Concern has been raised in certain sections of the media about the safety of deposits in certain banks.”

“This concern is based on analysis which is flawed,” said the tweet adding “the solvency of banks is internationally based on capital to risk-weighted assets (CRAR) and not on the market cap”. In the second part of the same tweet, RBI said that it closely monitors all the banks and “hereby assures all depositors that there is no such concern of the safety of their deposits in any bank.”

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The RBI’s tweet comes in the backdrop of the crisis surrounding India’s fourth-largest bank, Yes Bank. On Thursday, the RBI imposed a moratorium on Yes Bank, capping withdrawals at Rs 50,000 for the next one month. It later released a revival plan proposing that the State Bank of India (SBI) acquire a 49 per cent stake in Yes Bank.

SBI took the cue and issued a statement in this regard on Saturday saying that Yes Bank’s new board will have a chief executive officer (CEO) and a managing director (MD). All employees of the reconstructed Yes Bank will remain to be in service for at least one year at the same remuneration. Meanwhile, the Enforcement Directorate (ED) is investigating Yes Bank founder Rana Kapoor and his family members who have had suspicious transactions between them and NPA DHFL. Rana Kapoor was arrested on Sunday morning.