Four private players, including ICICI Bank and HDFC, announced their plans on Friday to buy into Yes Bank, pledging investments of `3,100 crore and joining State Bank of India (SBI) in pulling the country’s fourth-largest private lender back from the brink of collapse.
Four private players, including ICICI Bank and HDFC, announced their plans on Friday to buy into Yes Bank, pledging investments of `3,100 crore and joining State Bank of India (SBI) in pulling the country’s fourth-largest private lender back from the brink of collapse. Sources say high net-worth investors Rakesh Jhunjhunwala and R Damani, and Azim Premji Trust are also likely to invest `500 crore each in the crisis-hit bank.
ICICI Bank plans to invest `1,000 crore for an equity in excess of 5% in Yes Bank and HDFC, too, will infuse `1,000 crore, according to their filings with stock exchanges. Axis Bank will invest up to `600 crore to purchase 60 crore shares, while Kotak Mahindra Bank wants to pick up 50 crore shares for `500 crore. These proposals are subject to regulatory approval under a “reconstruction scheme” for Yes Bank, floated by the Reserve Bank of India (RBI).
SBI has already announced its intention to invest `7,250 crore to buy up to a 49% stake in Yes Bank. LIC, too, may invest.The crisis-hit bank will announce its December quarter results on Saturday.
Meanwhile, the Cabinet on Friday approved the Yes Bank reconstruction plan, under which private investors will be required to hold on to 75% of their stake in the crisis-hit bank for at least three years. SBI, too, won’t be allowed to dilute its holding to below 26% for a minimum of three years. Restrictions on cash withdrawal and other conditions imposed after moratorium was slapped on Yes Bank on March 5 will be lifted within three days of the notification of the SBI-led bailout plan, finance minister Nirmala Sitharaman said.
The notification will come very soon, she added, without giving a specific date. A new board will be constituted within seven days of the notification and the newly-appointed administrator Prashant Kumar will cease to function. The RBI had on March 5 superseded the earlier Yes Bank board, citing “serious deterioration” of its financial health.
“The decision to provide a reconstruction scheme keeps at its core the protection of depositors’ interest, keeps at its core providing stability to Yes Bank and also keeps at its core keeping a stable financial environment and banking system,” the minister said.
The authorised share capital of Yes bank had now been raised to Rs 6,200 crore from Rs 1,100 crore, Sitharaman said, which will pave the way for a cash injection. The size of the ‘problem book’ at Yes Bank is estimated by analysts at close to Rs 80,000 crore; stressed loans at the end of September 2019 were Rs 50,396 crore, up from Rs 43,482 crore at the end of June 2019.
Thanks to a steep increase in the BB and below pool in the last couple of years, the net stressed loans at the end of September stood at 18.7%. Some experts warned that around Rs 40,000 crore of the Rs 80,000 crore of the problem book may have to be written off.