This is in line with RBI Governor Shaktikanta Das saying on March 16 that if required the central bank would provide necessary liquidity support and this “should come as a comforting factor for depositors.” Moody’s also raised Yes Bank’s rating and upgraded its outlook to positive following the RBI presser.

The LoC, however, comes with a caveat – the first such exercise by the central bank, sources stated. Since the RBI is the ‘lender of the last resort’, as per terms of arrangement Yes Bank would have to exhaust immediate liquid assets before accessing this fund, they added.

In the past RBI has preferred to merge illiquid-insolvent banks, but since Yes Bank is solvent despite the liquidity issues the bank was allowed to continue. The last resort lender function provisions an LoC, a source told the paper.

The government on March 14 notified a rescue plan for Yes Bank, led by State Bank of India and joined by other lenders, as it looked to shield the banking sector from a widespread crisis. The so-called ‘reconstruction scheme’, cleared by the Union Cabinet, took effect on March 13.