YES Bank gets Rs 60k-cr line of credit from RBI to resume operations

RBI Governor Shaktikanta Das on Monday had said the regulator was ready to offer liquidity if required

The Reserve Bank of India (RBI) has extended a credit line of Rs 60,000 crore to YES Bank to ensure that the bank is able to meet its obligations to depositors as it resumed its full-service operations on Wednesday, according to sources familiar with the development. RBI Governor Shaktikanta Das on Monday had said the regulator was ready to offer liquidity if required.

“YES Bank has enough liquidity to meet any requirements. If required, the RBI will provide necessary liquidity support to it,” he said. “Never in the history of banks (in India) have depositors lost money. The point is, depositors’ money is absolutely safe,” Das had said in a conference, adding that the central bank’s support should come as a “comforting factor for depositors”.

However, this is a case of the RBI being the “lender of the last resort”, and, in accordance with the terms of the arrangement, the bank will have to use its immediate liquid assets before it can touch the credit line, sources said. This is perhaps for the first time that the RBI has come with such an arrangement. YES Bank gets Rs 60k-cr line of credit from RBI to resume operations In the past it preferred merging troubled banks with solvent ones. There is a technical reason for that even as the RBI officials did not spell it out in the press conference on Monday.

Budget 2020 Wishlist: Here are the key challenges for automobile sector

Like the last quarter, firms will focus across its value chain to ensure smooth transition to BS-VI

Sector snapshot

The FY20 year-to-date (April to December) domestic sales volumes in all vehicular segments witnessed a sharp decline with passenger vehicles and commercial vehicles reporting 16% and 21% drop, respectively. The key reason is subdued customer demand due to liquidity crunch and higher cost of finance and insurance. Like the last quarter, firms will focus across its value chain to ensure smooth transition to BS-VI.

Key challenges

Higher upfront cost: Customers are required to pay a higher upfront insurance premium for two – wheelers and four – wheelers and hence, sales volumes have dipped in these segments

Shift to BS-VI: The shift to BS-VI by April 2020 will be challenging for automakers as it will result in price increase which is likely to adversely impact demand

Liquidity crunch: The demand was impacted due to squeeze in the NBFC financing

Industry expectations

Reduction in GST rate applicable to automobiles to 18% from the current 28% to absorb the extra price impact of shift to BS-VI A cut in personal income tax rate will provide more disposable income in the hands of consumers, which could lead to automotive demand recovery…Keep Reading