Yes Bank Account Holder? Keep These In Mind
YES Bank – the beleaguered private sector lender that has been in the news for all the wrong reasons of late, was up more than 25% yesterday; but that appears to have been no more than a dead cat bounce. After the RBI sent YES Bank the PMC way late Thursday evening by placing a 30-day moratorium on it and restricting withdrawals exceeding Rs. 50,000, the stock went into a tailspin on the bourses, losing nearly half its value. At a stage, the stock was trading in single digits, down 80% from its previous close. If you’re a YES Bank Account Holder, you need to keep these things in mind.
What’s the road ahead like?
In this 30-day period, the bank will either get a fresh lease on life, or go under. The Reserve Bank has pledged its full commitment to ensuring that the bank gets revived. However, this would depend upon a host of factors; first and foremost being whether funding terms can get successfully negotiated with SBI and LIC, the two public sector behemoths that have been called upon to bail out the bank.
If the bank survives and gets onto a glide path for revival, account holders will get their full money back. To prevent a run on the bank, the RBI may continue restricting withdrawals till the dust settles, so there’s precious little you can do right now except wait and watch how things evolve.
If the bank fails (an outcome that cannot be written off, however remote), the picture will be grimmer. Deposit insurance will kick in and account holders will receive up to 5 Lakhs, regardless of the total amount parked across FD’s, Savings Accounts and even lockers. Needless to say, all steps would be taken by the RBI to ensure this does not happen, as it would be an extremely unfavourable outcome.
What about Mutual Fund holders?
If you have Mutual Funds that are linked to YES Bank, your SIP’s (Systematic Investment Plans) should go through normally in March, if the cumulative monthly amount, plus the other withdrawals that you’ll be making, don’t exceed Rs. 50,000. If not, you may find some of your SIP’s getting rejected this month.
If your existing Mutual Fund investments are linked to YES Bank, you are strongly advised to change your bank mandate from YES Bank to a different bank, if you have one. If you don’t have a second bank account, go on and open one quickly. The last thing you’d want is to redeem moneys into your YES Bank account, and have them stuck! To change your bank mandate, you could get in touch with your Mutual Fund Advisor – or with the Mutual Fund Company, if you’re a direct plan investor. Bank Mandate Change requests for many of the large AMC’s (including ICICI Prudential, HDFC, DSP and SBI) can be submitted at your closest CAMS centre. A list of CAMS Points of Service is available on the AMFI website here:
In addition, you should also speak with your Advisor and effect a bank mandate change for any operational online Mutual Fund transaction platforms (such as BSE Star MF or NSE MF II) that you might have. If not, your YES Bank account will be automatically linked to any new investments you’ll make from this point on.
Running EMI? You need to act fast!
Those with running EMI’s are in a far trickier situation. Home Loan EMI’s with high ticket sizes exceeding Rs. 50,000 per month are lot more common than Car Loans or Personal Loans. If that it the case for you, your EMI is going to bounce this month, unfairly hurting your credit score in the process. You should head to a different bank today itself and place an account opening request, post which you should speak with your lender and arrange for a change in your ECS mandate. If you already have a second operational account, you need to shift your ECS mandate for your EMI today itself.
Should you buy the stock?
Is YES Bank a bargain at Rs 15-17? It’s hard to say, but the recent trend and incoming data flows do not paint a pretty picture. Just because a stock has come off its highs, doesn’t mean it can’t go even lower – the bourses are peppered with penny stocks that were once mighty giants. It may be wisest to follow the old adage and “not catch a falling knife”. Wait for the dust to settle before you take an investment decision with the stock, even at the cost of some foregone gains.
