Govt, RBI preparing bailout plan for Yes Bank; crisis-hit private lender hopes to tie up funds by next week

The government and the Reserve Bank of India (RBI) are reportedly preparing a bailout plan for the crisis-hit private lender Yes Bank, said a news report.

The reported move is in case the proposed $2 billion capital infusion  is delayed beyond 14 March, 2020

According to sources in the know,  RBI intervention may include a sale of pooled assets to public sector banks (PSBs) or, as a last resort, sale of a small stake to a PSB to pave the way for further capital raising, said a report in Mint.

Yes Bank expects that it can tie up the funds by 14 March though there is a possibility that a major state-run bank may be asked to step in as an interim measure if the investors fail to come up with funds, said the report quoting people in the know of the matter.

Early this month, Yes Bank had appointed Anshu Jain-headed global investment bank Cantor Fitzgerald and two domestic entities for its fundraising plans.

Other merchant bankers appointed by the capital-starved lender include IDFC Securities and Ambit Capital.

Jain is the ex-colleague of Yes Bank’s current Managing Director and Chief Executive Officer Ravneet Gill, who has made the capital-raising as his top priority after taking over last March.

Jain was the co-chief executive of German lender Deutsche Bank globally, while Gill was heading the India operations.

Recognition of sour bets taken under Gill’s predecessor Rana Kapoor has depleted Yes Bank’s capital buffers, and also forced it to reduce its loan book.

It has, however, been struggling to raise the required capital for the past three months. It initially announced a plan to raise $2 billion, and had last month announced a new round of Rs 10,000 crore in fresh capital.

On 10 January, the bank’s board had decided that Canadian investor Erwin Singh Braich’s $1.2-billion offer will not be pursued further, and also hinted that a $500-million offer from Citax Holdings and Citax Investment Group, which was being favourably considered, is facing headwinds.

The bank’s liquidity coverage ratio was 114 percent at end-September as against the regulatory requirement of 100 percent. It also said that the bank’s business model could evolve and may settle at lower non-interest income levels.

Yes Bank had initially planned to raise capital of over $1.2 billion in the current fiscal, but its board has rejected the binding term sheets of $1.2 billion offered by Canadian investor SPGP Group/Erwin Singh Braich.

In January this year, rating agency India Ratings and Research (Ind-Ra) had said Yes Bank continued to remain in discussions with potential investors but raising sizeable capital in the near-term could be challenging.

The rating agency had maintained ‘Rating Watch Negative (RWN)’ on the private lender. RWN indicates that the rating will be either affirmed or downgraded.

Ind-Ra had said it continues to await developments on Yes Bank’s equity raising, which in the rating agency’s opinion is critical for providing sufficient cushion to the possible credit cost impact from the stressed asset pool on regulatory capital requirement in the short- and medium-term.

— With PTI inputs