RBI INTERVENTION

The stock price came crashing down the share price as the share price of a bank depends upon
many factors and is not very much stable. The present and future condition of the bank plays a
vital role in the determination of the share price. The reason for the crashing share price of the
bank is the moratorium imposed by RBI, as there is a cap on withdrawal most of the investors
are not interested to invest hence the share price is low. Since the SBI is coming with the
investment and the moratorium period is also only 30 days there are high chances that the bank
will bounce back and there could be a good amount of long-term investments.

Mr. Iyer explained very basics of the Indian banking system. According to him, India follows a
very traditional banking system i.e. The Fractional Reserve Banking. According to this principle,
the bank keeps some of the money of the holders as the Capital Adequacy Ratio, the remaining
money Is then lent out. Mr. Iyer proved his point by giving a very specific analogy of the ICICI
bank in the 2008 financial crisis. In the crises, the bank went out of reserve and was hence in
crisis, and there was a run on the bank by the account holders. A withdrawal cap is not an option
as it just creates panic amongst the account holders. Instead of the withdrawal cap, confidence is
needed to pump into the account holders and should give the surety that their money is safe,
additionally, the opportunity of the full money withdrawal should also be given in order to avoid
panic amongst the account holders.

The concerns of the account holders is acknowledged, however the period of the RBI
intervention through moratorium is only for a short period of time i.e. 30 days. After 30 days SBI
will be investing money in the yes bank, so the chances of normalization are high. Additionally,
the Yes Bank, SBI, and RBI are unanimously saying that the money of people is safe, hence the
account holders should not worry about their money.

YESBANK-SBI DEAL

Since the share price of the bank has gone significantly down the scope of further long-term
investments depends on multiple factors. SBI is acquiring some stakes in yes bank and hence
there are high chances that the investors will invest more on the bank. There are great chances
that the bank will bounce back as the SBI investment will boost the investment and will also
pump confidence in the account holders.

REFERENCES

 https://www.iosrjournals.org/iosr-jbm/papers/Vol22-issue7/Series-7/E2207073645.pdf
 https://www.drishtiias.com/daily-updates/daily-news-editorials/the-yes-bank-crisis
 https://www.business-standard.com/about/what-is-yes-bank-crisis