With deposits of over Rs.200,000 crore and a massive loan book, Yes Bank’s relations run deep into the economy. How should investors and depositors handle their relationships with Yes Bank now? This pertains to deposits, bonds, shares, loans taken and even mandates.
What happens to deposits?
The good news is that all deposits in Yes Bank are safe as per the assurance of the Finance Minister. However, it is better to be safe than sorry and you need to start winding down your links with the bank gradually. Ensure that your employer immediately shifts your salary account from Yes Bank and do the same if you are a businessman and employ people. All checks issued on your Yes Bank account will not be valid so you need to inform the payee and make alternative arrangements.
What about loans taken?
If you think you don’t need to worry about loans taken from Yes Bank, think again. Your deposit balance will stand reduced to the extent of the loans and guarantees outstanding. To that extent, your withdrawal power will be reduced. Whether SBI takes over these loans in its books in the future is not known but it is better you also privately negotiate with your principal banker to take over these loans post-April. Till April 03rd, these loans will impair your ability to withdraw cash from Yes Bank, so be prepared.
What about investments?
This is a slightly more complicated issue. If you are having shares of Yes Bank, you should look at the first opportunity to exit the stocks. A lot of investors tend to hope that, like Ruchi Soya, Yes Bank could also become a multi-bagger once the SBI deal is done. But, hope can be a good breakfast but a bad supper. Yes Bank is a different ball game as it has a lot of loans of dubious quality. It could eventually see its net worth wiped out leaving little for equity shareholders. It is better not to be too optimistic. Regarding the AT1 bonds, the RBI has already written down the value to zero, so you get nothing. What if your MF is holding Yes Bank bonds? You don’t lose much since these bonds are already written off. You can as well wait!
Finally, about the mandates
This is where you need to move quickly. If you have a broking account linked to Yes Bank, ask the broker to freeze payouts and change the bank mandate. In the case of MF SIPs linked to Yes Bank also you need to change the bank mandate immediately. Otherwise, your SIP mandates could bounce. Ensure that Yes Bank is not your default bank account to receive any payouts either for stock trading, Demat account, mutual funds, gold bonds or even your insurance payouts. Above all, log into your Income Tax website and change Yes Bank mandate. That is a priority!