RBI bars Yes Bank from paying interest on tier-2 bonds

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Published: June 22, 2020 11:27 PM

Interest payments on Yes Bank's 10.25 per cent unsecured non-convertible upper tier-II bonds issued in 2012 is due on June 29 and the city-based lender had sought the RBI nod to honour the same.

RBI, Yes Bank, yes bank tier-2 bonds, yes bank tier-2 bonds interest, Reserve Bank,Prashant Kumar, rana kapoorAs per the June 25, 2012 memorandum at the time of issue of the bonds, the interest due will be accumulated and paid later once the bank complies with stipulated regulatory requirements.

The Reserve Bank has asked private sector lender Yes Bank not to pay interest on tier-II bonds due on June 29 as its capital levels are below the mandatory threshold.

Interest payments on the bank’s 10.25 per cent unsecured non-convertible upper tier-II bonds issued in 2012 is due on June 29 and the city-based lender had sought the RBI nod to honour the same.

“The Reserve Bank of India has expressed its inability to accede to the bank’s request for payment of interest due as on June 29, 2020, since the bank does not meet the minimum capital requirements currently. Therefore, the bank would be unable to pay interest/coupon on the said upper tier II bonds which is due for payment on June 29, 2020,” the bank informed the exchanges on Friday.

As per the June 25, 2012 memorandum at the time of issue of the bonds, the interest due will be accumulated and paid later once the bank complies with stipulated regulatory requirements.

“….the specific features of the instrument require debt servicing to be linked to the bank meeting regulatory norms on capital adequacy,” its managing director and chief executive Prashant Kumar said.

Asserting that the bank has adequate liquidity to meet all its obligations, Kumar said the coupon on these bonds is cumulative in nature and any unpaid sum will become payable once the bank meets minimum regulatory capital ratio.

The bank’s total capital adequacy ratio had stood at 8.5 per cent, including the tier-I ratio at 6.5 per cent as of March 31 this year. The regulatory requirement is to maintain the tier-I ratio above 8.875 per cent.

The bank, which had to be bailed out by a SBI-led consortium of lenders in March, is reportedly looking at a Rs 10,000-crore capital raise from new investors at present and already has enabling resolutions to raise up to Rs 15,000 crore.

As part of the bailout, SBI and other lenders had infused Rs 10,000 crore into Yes Bank, who’s top management and the board was dissolved by the Union government on March 5 as part of a scheme decided by it with the RBI. As part of the same scheme, over Rs 8,400 crore in additional tier-I bonds were written down.

The Yes Bank scrip closed 0.89 per cent down at Rs 27.75 apiece on the BSE on Monday as against gains of 0.52 per cent on the benchmark.

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