India markets open in 4 hours 9 minutes

Yes Bank to raise Rs 20,000 crore in maiden effort to raise funds post SBI-led bailout

Kshitij Bhargava

In its maiden effort to gather funds after being bailed out, cash-starved private lender Yes Bank is planning to raise Rs 20,000 crore via certificate of deposits from institutional investors, including banks. The effort to raise funds comes after the Reserve Bank of India (RBI) extended a Rs 60,000 crore line of credit to the lender who has lost more Rs 43,000 crore worth of deposits in the third quarter of this fiscal. However, the RBI line of credit is only available to Yes Bank as the last resort. Yes Bank’s capital raising effort has got a thumbs up from rating agency Crisil, which has assigned an A2 rating to the program.

Crisil's rating comes with the hope that India's largest public sector bank, State Bank of India (SBI) will continue to provide systematic support to Yes Bank. SBI along with private investors, ICICI Bank, HDFC, Axis Bank, Kotak Mahindra Bank, IDFC Bank and Bandhan Bank invested in the struggling Yes bank to the tune of Rs 10,000 crore by picking up equity shares at Rs 10 per share. This effort to raise Rs 20,000 crore will be the first independent fund-raising effort the bank will undertake since its board was superseded by the RBI, placing it under a moratorium and limiting withdrawals to Rs 50,000 per depositor.

"CRISIL’s rating centrally factors in the extraordinary systemic support from key stakeholders. All the key stakeholders, including the Ministry of Finance, RBI, and SBI have, over the past few days, reiterated in various forums that depositors’ money in Yes Bank is safe and in case of any requirement, they will continue to ensure the safety of deposits through various measures," the rating agency said. Crisil's strong rating for Yes Bank's certificate of deposits stems from the expectation that SBI will invest in the scheme. Rajnish Kumar, Chairman SBI, announced earlier in the week that the shares allotted to SBI will not be sold by the bank for the entire three-year lock-in period.

Yes Bank has witnessed a steady outflow of deposits in the past few quarters given the capital raising challenges faced by the bank. Between December 31, 2019, and March 5, 2020, the deposit base shrunk by around Rs 28,000 crore. Since March 31, 2018, the deposit base has declined by over Rs 63,000 crore, Crisil noted. Asset quality of the lender still remains an issue, with gross non-performing assets (NPA) shooting up to 18.9 per cent in the third quarter. However, Prashant Kumar the soon-to-be Managing Director and CEO of the bank claimed that depositors were confident the bank would soon be back on its feet, adding that just before the moratorium was lifted there was more cash inflow than outflow from customers.