It is just the start of the month and YES Bank customers are up for a crude shock. From electricity, water, phone and credit call bills to EMIs, insurance premiums and SIPs, it's time to make all monthly payments, but their money is stuck. On one hand, online banking is down, on the other, there are long queues at bank branches. Moreover, you cannot withdraw more than Rs 50,000 until April 3. This includes your ECS mandates such as SIPs and EMIs. While you will have to make alternative arrangements for the short-term, you must know your money in the YES Bank account is safe. We have answered some key questions that must be troubling you:
Will you lose your deposits?
Unlikely. Although comparisons have been drawn with the PMC Bank where depositors' fate is still hanging in balance, you must know your deposits are insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC). DICGC does honour the payments. In FY19 alone until September 30, 2019, DICGC has either settled claims or given in-principal approval for payment of deposit insurance to the depositors in case of nine co-operative banks.
As for YES Bank, it is being a scheduled commercial bank, the government and the regulator RBI are unlikely to let it go bust.
"Unlike cooperative banks, where there is dual regulation, in case of scheduled commercial banks, RBI is the sole regulator. Going by past acquisitions (Oriental Bank of Commerce's acquisition of Global Trust Bank, IDBI's acquisition of United Western Bank, ICICI Bank's acquisition of Bank of Rajasthan and Sangli Bank), depositors didn't lose money in any of those acquisitions and eventually the acquiring bank honoured all the commitments," says foreign brokerage Macquarie in a note.
What Rs 50,000 limit means?
YES Bank is under moratorium for thirty days until April 3 during which you can not withdraw more than Rs 50,000. The limit includes all transactions, be it withdrawal from your savings account, fixed deposits or ECS mandates for loans and SIPs. So, if you make SIP payments of Rs 10,000 now on, you will only left with Rs 40,000 to withdraw. Please note any payments towards bills received for collection on or before 5 March 2020 won't be included in this limit.
"The regulator is acting in the best interest of retail customers and to protect all deposits. The withdrawal norms are likely to be relaxed in the future, as we've seen in past episodes of this kind," says BankBazaar CEO Adhil Shetty.
Servers down; how to withdraw money?
Most YES Bank customers have not been able to withdraw money from its own or third party ATMs, nor are they able to transfer the money online, given the website and the smartphone application have gone kaput.
"Currently, YES Bank customers can do little other than withdrawing Rs 50,000 till the RBI comes out with fresh announcements regarding the moratorium. They have to visit YES Bank branches to make withdrawals from the cash counters," says Naveen Kukreja - CEO and Co-founder, Paisabazaar.com.
How to get your EMIs funded?
For shifting your loan payments, you may simply reach out to your lender for the relevant forms to initiate a new ECS mandate and get it approved by the bank you wish to shift to because in case you fail to make payment, it will impact your credit score and onus will lay on you to get it fixed.
"Missed EMIs and credit card payments will certainly hurt your credit score and it's to be seen if lenders will provide any leeway to customers who hold accounts with YES Bank. A single late payment has the potential to reduce your credit score by more than a hundred points. It will only be fixed through several months of timely repayments. Credit bureaus are unlikely to entertain disputes raised by late payers linked to YES Bank. The onus is on customers to ensure timely repayments," says Shetty of BankBazaar.com.
What about SIPs and insurance premiums?
Asset management firms such as Kotak Mahindra Asset Management Company and Edelweiss Mutual Fund have already announced that redemption payouts will not be made to YES Bank accounts from Friday onwards. Now you must cancel existing mandates with YES Bank at the earliest and initiate new ones with your other bank. "SIP payments are best managed online. You can at any point change the bank account from which your SIP payments happen," says Shetty.
What lies ahead?
In an attempt to bail out the bank, the government has granted approval to a consortium led by State Bank of India to buy stake in the YES bank.
"SBI is a great bank brand and we look forward to hearing how we can get YES Bank to full operating levels across assets and liabilities," says Shetty.
Experts believe there could be a merger of the bank with the SBI. "If SBI indeed takes over YES Bank, it will be a win-win situation for all YES Bank stakeholders, including depositors. They will be treated as SBI customers thereon."
All eyes are on the RBI for further notification on the issue. On Friday, RBI governor Shaktikanta Das said that the central bank will take a swift action to put in place a scheme to revive YES Bank.
What lesson do you learn?
As the saying goes, 'don't put all your eggs in the same basket', it is better to maintain two bank accounts in the current digital age for if there is an technical or operational issue with one account, you may resort to another.