RBI Asks States Not To Move Deposits Out Of Private Banks In Wake Of Yes Bank Crisis

The Reserve Bank of India (RBI), in a letter on Thursday asked the state governments not to resort to panic and move their deposits from private banks, reported news agency Press Trust of India (PTI).

According to PTI, 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. 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 also stated.

Earlier on Wednesday, news agency IANS reported that the Maharashtra government has decided to shut down one of its accounts in private lender Axis Bank, in the wake of the Yes Bank crisis. The report also quoted official sources saying that henceforth the state government would bank only with reputed public sector lenders to ensure the safety of all its funds.