State Bank of India (SBI) is reportedly set to rescue Yes Bank, which has been put under moratorium last week by the Indian central bank.
Yes Bank has been struggling to raise sufficient new capital to boost its capital ratio and cover potential loan losses.
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SBI, the country’s largest public sector bank, would inject INR24bn ($324m) to acquire a 49% stake in the country’s fifth-largest private sector lender.
“With SBI running the bank, concerns over liquidity and viability of Yes Bank as a going concern have receded,” two people familiar with the development told livemint.com.
RBI has barred Yes Bank from granting or renewing any loans, incur any liability or make any investments. Furthermore, customer withdrawals have been restricted to INR50,000 ($676).
“Placing caps on withdrawals can be counter-productive. The RBI feels the limit can be withdrawn earlier and that should happen by 23 March,” the publication quoted one of the sources as saying.
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By GlobalDataThe RBI intends to remove the cap on withdrawals by 16 March but the date may get pushed off by a week if Yes Bank’s additional tier 1 (AT1) instruments holders approach the Supreme Court.
The fate of Yes Bank promoter:
Meanwhile, The Enforcement Directorate (ED) – the agency which investigates financial crimes – arrested Yes Bank promoter, Rana Kapoor, in a money laundering case yesterday.
He has been sent to the ED custody till 11 March by a Mumbai court.
The agency also interrogated Kapoor and conducted searches at his and his daughters’ residences in Delhi and Mumbai.
Amid corruption investigation, Roshni Kapoor, one of the daughters of Rana Kapoor, was stopped at the Mumbai airport before boarding a flight to London.
Yes Bank troubles:
At 7.4%, Yes Bank’s NPAs is the fourth-worst performing compared with other major banks in India.
Yes Bank, which was founded in 2004, currently accounts for approximately 2.3% of total bank loans and 1.6% bank deposits domestically.
SBI Role:
Rajnish Kumar, the chairman of SBI, said that his bank’s legal team was doing the due diligence on RBI’s draft scheme for Yes Bank and would respond by Monday.
He added the SBI is looking at the deal as a pure investment and it would make sure that its shareholders’ interest is fully safeguarded.
However, he ruled out a merger with Yes Bank.
Will be going to RBI on Monday with our comments, Kumar added.
According to moneycontrol.com, Indian banking giant HDFC is also keen on investing in Yes Bank.
“SBI as the anchor investor and RBI setting the base price at Rs10 is making Yes Bank an attractive investment proposition,” an official told the publication.
