The Reserve Bank of India (RBI) has taken control of the Yes Bank board for 30 days and imposed a moratorium from March 5 to April 3. Frantic depositors thronged Yes Bank branches and ATMs to withdraw their money.

Each depositor will be able to withdraw only up to Rs 50,000 till the moratorium is in place. However, depositors can withdraw up to Rs 5 lakh, or the amount lying in the account, whichever is less, in circumstances such as a medical emergency or marriage

Usha Thorat, Former Deputy Governor of Reserve Bank of India; Ananth Narayan, Professor at SPJIMR; VG Kannan, Former CEO of IBA; Deepak Shenoy, Founder of Capitalmind and Manoj Nagpal, MD and CEO of Outlook Asia Capital discussed what investors and depositors could do.

Thorat said that the depositors should not be worried. “RBI is there to protect the interest of the depositors. That is exactly what we did in the case Global Trust Bank (GTB). There are powers under the RBI Act, RBI has the power and I am sure it will do everything it can to protect the interest of the depositors,” she said.

Concurring with Thorat's view, Ananth Narayan said that it does not matter whether your deposit amount is Rs 1 lakh or Rs 10 lakh. “RBI has made it extremely clear that depositors’ interest will be protected and so has the government. What Mrs Thorat said is absolutely right that the depositors need not worry. Other parts of the ecosystem might have to think about things, but depositors need not worry at all,” he said.

According to Kannan, RBI has clear plans and there is certainty in place. “This is the first time they have put a moratorium only for a period of one month, which basically means that they have got some very clear plans in mind. Hopefully the entire thing will not last longer. In the case of PMC, it was ‘till further orders’, here some sort of certainty appears to be in place,” he said.

Answering a query on auto debit facility and whether credit cards payments will bounce, Deepak Shenoy said, “From a perspective of debit, the rule applies across the board no matter how that debit happens, whether it is auto debit, a cheque, NEFT transfer or a debit on case of the IPO. The limit is Rs 50,000 and anything more than that will be rejected. I do not know how the implementation will be internally, but that is what RBI has said. So, I do not think any amount more Rs 50,000 will be allowed to leave the account in whichever manner it might choose to be transacted. So, the short answer in both cases is, it is not going to go through if it is more than Rs 50,000.”

Nippon India has written down the entire exposure that they had to Yes Perpetual bonds to zero. They have restricted the subscription. Speaking whether a similar route will be taken by other AMCs as well, Nagpal said, “People who have invested in debt mutual funds, there are approximately around 30-35 mutual fund schemes that have been impacted because of that and it is spread across 6-7 mutual funds. The largest exposure is Nippon Mutual Fund and the problem with them is that the exposure in some of their schemes is as high as 25 percent."

"The Nippon Strategic Debt Fund has an exposure of almost 25 percent in this particular bond and they have taken a call that they have written it down to zero. In fact some of the other fund houses as well like Franklin Templeton Mutual Fund have written it down to zero yesterday," added Nagpal.

However, since the exposure to the overall NAV of these bonds is 1-1.5 percent, they have not restricted any fresh inflows. Only, when it becomes a large part of your scheme - more than 10 percent of your scheme, which is the case with Nippon Mutual Fund in one of their schemes and in other schemes also it is almost touching 8-9 percent, hence they have restricted inflows to this entire thing, said Nagpal.

"My view is that out of the 30-35 schemes that will be impacted, almost 20-25 schemes have already taken a hit on this by writing it down to zero as a prudent measure, the valuation agencies have provided a cut down of another 25 percent, Nagpal said.

However, most of the mutual funds have taken a very prudent view. These kind of bonds have exit clauses for both the existing bank and even if it is amalgamated into another bank, the other bank also has the option of not paying these bonds to the extent that it is there. Hence the risk on such bonds is fairly high of not getting the money back.”