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Mar 06, 2020 10:11 PM IST | Source: Moneycontrol.com
Yes Bank News Highlights: Preferential issue or QIP on back of SBI will open floodgates of capital, says Rana Kapoor
Steps taken by the RBI on Yes Bank are in the interest of depositors, said Finance Minister Nirmala Sitharaman.
The Reserve Bank of India (RBI) on March 5 said it is superseding the board of troubled private sector lender Yes Bank with immediate effect.
Former State Bank of India CFO Prashant Kumar has been appointed the administrator.
"This has been done to quickly restore depositors' confidence in the bank, including by putting in place a scheme for reconstruction or amalgamation," the RBI said in a statement.
The central bank has also imposed a moratorium on the private lender till April 3, 2020. Withdrawals from the bank have been capped at Rs 50,000 per depositor.
The move by RBI comes nearly six months after it did the same with Mumbai-based Punjab and Maharashtra Cooperative (PMC) Bank.
Yes Bank has been grappling with mounting bad loans and has been struggling to raise fresh capital.Read More
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Rana Kapoor to Moneycontrol: I personally believe it's a good clinical move and at least there is a methodology in making sure that the bank has a safe landing and the process and the timelines are well defined.
If there is an incremental preferential issue or a QIP or even for that matter, a rights issue on the back of SBI anchoring the bank going forward … I would reckon that the flood gates for all sources of capital — domestic and overseas — will open up. The institution itself has always attracted all forms of capital in the past via QIP and bonds.
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Moody's Investors Service on March 6 downgraded Yes Bank Ltd's rating following RBI imposing a 30-day moratorium that prevents the lender from making payment to its creditors.
"The ratings remain under review, with the direction uncertain," Moody's said downgrading Yes Bank Ltd's long-term foreign currency issuer rating to Caa3 from B2.
Moody's has also downgraded the bank's long-term foreign and local currency bank deposit ratings.
-PTI
Official to PTI: About Rs 191 crore of Nagpur University are stuck with the crisis-hit private lender Yes Bank.
Here's why Rana Kapoor's ambitions plans failed to fructify
The founder of Yes Bank was the consummate banker, reluctant to say no to loan requests, but in the end has become emblematic of the perils of promoter-driven banking model in India.
Odisha Minister Pratap Jena on Rs 592 crore deposit of Jagannath Temple in Yes Bank: Fix deposits of the temple in the bank will mature on March 16 and March 29. After that, temple admin will withdraw money and put it in a nationalised bank. Bar on money withdrawal is for saving accounts only.
Suman Chowdhury - President Ratings at Acuité Ratings & Research Limited: The announcement of a moratorium on Yes Bank and the release of a draft scheme of reconstruction strongly validates the inherent risk in Additional Tier-1 Bonds or Innovative Perpetual Debt Instruments (IPDI) which form part of the Tier-1 Capital of a bank. This is for the first time in the history of the Indian Banking sector that a bank’s T1 bonds is being written down at the ‘point of non-viability’ (PONV) i.e. the investors have to take a hit on both principal and the balance interest payments.
Acuité Ratings understands that the outstanding additional T1 (AT1) bonds issued under Basel III norms for Yes Bank stands at Rs. 10,800 Cr. Clearly, the investors in such AT1 bonds, mainly comprising mutual funds and banks’ treasuries will need to take a significant hit due to this development. Acuité also believes that this will limit the market for AT1 bonds in India only to issuances by a few large public sector banks and further, the pricing will see increased differential with that of Tier-2 bonds to reflect the differential risk.
Gaurav Dua, Sr VP, Head – Capital Market Strategy & Investments, Sharekhan by BNP Paribas: Another bank bites the dust. This time its Yes Bank – one of the large private sector banks. RBI has stepped in and leading state-owned institutions are patching up a bailout plan for the bank and more importantly, safeguard the interest of depositors. However, the already weak sentiments have been dented further. The series of accidents in the Indian financial sector sends out a very poor message to the foreign investors.
Fitch Ratings: The central bank's takeover of Yes Bank appears intended to restore depositor confidence. However, we believe that there is a risk that the RBI's move could backfire if it prompts depositors to shift their money to institutions that are perceived to be safer. This could pose liquidity challenges, particularly for smaller private banks with weaker franchises or more limited access to support from parent entities.
The speed of the authorities' resolution of the situation at Yes Bank is likely to be an important factor in determining the reaction of depositors and financial markets. Absent a formal resolution framework for financial institutions in India, the onus ultimately falls on the regulator to orchestrate the process under powers provided by the RBI Act, which outlines voluntary or forced mergers as the available options.
VK Vijaykumar, Chief Investment Strategist at Geojit Financial Services: The Yes Bank problem has been a market concern for many months now. RBI preferred, and rightly so, an internal resolution of the problem through capital infusion. But now the central bank has acted since the bank management failed to raise capital. A quick resolution can be expected. There is no systemic issue or contagion consequences. No need to panic.
Yes Bank crisis: Loss of life savings to calling off weddings - customers fear the worst
There is panic among Yes Bank account holders who are now wondering what happens to their loans and deposits.