MUMBAI: India’s cabinet has approved a rescue plan for Yes Bank, the finance minister said on Friday, in a bid to prevent a broader banking crisis.

The state-owned State Bank of India (SBI), the country’s largest lender, would take a 49 stake in Yes Bank, Finance Minister Nirmala Sitharaman said, while private lenders also committed to invest in the bank.

The Reserve Bank of India (RBI), or central bank, took control of Yes Bank last week, imposing limits on withdrawals to prevent a run on deposits before working out a rescue for the bank once considered a rising star after it was set up in 2004.

The authorities have opened investigations into Yes Bank’s lending practices that led to its failure and the bank’s founder and former managing director, Rana Kapoor, was detained and a case of money laundering registered against him.

Kapoor has said he is ready to cooperate with investigators. His lawyer has said he was being made a scapegoat.

India’s largest private banks and others joined the rescue.

“Other private banks rushing in to rescue Yes Bank sets a good precedent,” Asutosh Mishra, head of research of institutional equity at Ashika Stock Broking.

ICICI Bank and one of the country’s largest housing shadow lenders HDFC Ltd said they would invest up to 10 billion Indian rupees ($135m) each and would each take over 5pc stake.

Axis Bank said it intended to invest up to 6 billion rupees and Kotak Mahindra Bank committed to invest 5 billion rupees.

Published in Dawn, March 14th, 2020