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3-year-lock in for existing Yes Bank shareholders may invite legal challenge

Some agree with government’s decision and believe that once things get stabilised investors could leave without losing.

3-year-lock in for existing Yes Bank shareholders may invite legal challenge

Minority shareholders of the private sector bank could approach the courts against this differential treatment. (Photo: IANS)

The government decision to impose a three-year lock-in period on all investors holding more than 100 shares or more for 75 per cent of the total investment in Yes Bank may create room for a legal tussle, with experts suggesting that minority shareholders of the private sector bank could approach the courts against this differential treatment.

As per the reports, retail investors collectively held 48 per cent in the troubled bank at the end of December quarter, highest event compared with September quarter’s 29.9 per cent.

“It is unprecedented that the government scheme is disallowing existing shareholders to sell their stock and that too with retrospective effect. This could be challenged by minority shareholders in court. But the idea of the scheme to ensure long term liquidity in the bank so that depositors’ interests are protected. Also, the move would prevent speculative trading in Yes Bank stock that is also a reason for its downfall,” said a banking sector analyst asking not to be named.

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Some agree with government’s decision and believe that once things get stabilised investors could leave without losing.

“Yes Bank has a large retail investor base that may go jittery with the lock-in period. But with SBI and other banks joining to rescue the private sector lender, bank’s valuation would grow going ahead and investors could exit later without losing,” said another banking sector expert.

Government on Saturday notified reconstruction scheme for Yes Bank that has raised its authorised capital to Rs 6,200 crore. Country’s largest bank State Bank of India is coming in with an investment of Rs 7,250 crore as anchor investor while other private banks, HDFC, Kotak, Axis, ICICI together have committed Rs 3,100 crore towards equity of the cash strapped bank. More investors are likely to join soon.

(With input from agencies)

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