The Reserve Bank of India (RBI) on Thursday urged states not to transfer their deposits out of private sector banks, saying apprehensions about the safety of deposits are "highly misplaced". The statement comes over a week after the Central Bank imposed a moratorium on Yes bank.
The moratorium capped the withdrawal limit for depositors at Rs 50000 per month per account. In a letter written to chief secretaries of all states, the central bank said moving deposits out of private sector banks could have implications for banking and financial sector stability, PTI reported.
"We strongly believe that such a move can have banking and financial sector stability implications," the RBI wrote. "We feel that apprehension on the safety of deposits in private sector banks is highly misplaced and will not be in the interest of stability of the financial system in general and the banking system in particular."
The letter came after reports suggested that some state governments have advised government bodies and other entities under their jurisdiction to transfer their funds held with private sector banks to public sector lenders.
"The Reserve Bank has adequate powers to regulate and supervise the private sector banks and by using these powers, it has ensured that the depositors' money is entirely safe," the letter said. The RBI said the resolution of weak private sector banks in the past has been done in a manner that the depositors are not put to loss.
The central bank said moving deposits out of private sector banks could have implications for banking and financial sector. Photo- Dalip Kumar
Earlier in the day, Himachal Pradesh Chief Minister Jai Ram Thakur informed the Assembly that more than Rs 1,900 crore belonging to the state government and people in the state are stuck in the nine branches of the collapsed Yes Bank.
Meanwhile, State Bank of India said that its board has approved the purchase of 7.25 billion shares worth Rs 72.50 billion in Yes Bank as part of an initial phase of a rescue deal.