Yes Bank crisis: SBI commitment could touch Rs 10,000 crore — Full rescue plan 

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Published: March 8, 2020 6:00 AM

The move will have a very marginal impact on capital adequacy ratio of SBI, its chairman Rajnish Kumar said on Saturday.

“Presuming Yes Bank needs Rs 20,000 crore capital... and SBI picks 49% stake in the bank, investment will be around Rs 10,000 crore or so,” Kumar explained.“Presuming Yes Bank needs Rs 20,000 crore capital… and SBI picks 49% stake in the bank, investment will be around Rs 10,000 crore or so,” Kumar explained. (ANI Image)

State Bank of India (SBI), which has come to the rescue of Yes Bank, is expected to invest anywhere between Rs 2,450 crore and RS 10,000 crore in the troubled Yes Bank. The move will have a very marginal impact on capital adequacy ratio of SBI, its chairman Rajnish Kumar said on Saturday.

Kumar said Rs 2,450 crore was the minimum amount for acquiring 49% stake in Yes Bank. He also hinted that upper range of the investment could be around Rs 10,000 crore. “Presuming Yes Bank needs Rs 20,000 crore capital… and SBI picks 49% stake in the bank, investment will be around Rs 10,000 crore or so,” Kumar explained. SBI’s investment will depend on how many new investors it gets on board.

Kumar also said that SBI was in talks with other investors, as some have shown an interest after the announcement of RBI’s recast plan for Yes Bank. The country’s largest lender will not be involved in the daily running of Yes Bank. As an investor, SBI will have two directors on the board of Yes Bank. “The MD of the reconstructed bank will not be from SBI, ” Kumar said. “We will maintain two arm’s-length distance with Yes Bank and will let its independent board run the bank,” he added.

The Reserve Bank of India (RBI) on Friday came up with a draft reconstruction plan, under which SBI was to invest up to 49% in Yes Bank. The public sector bank has to submit its reply on the reconstruction plan by Monday.

Rajnish Kumar said his investment and legal team was doing the due diligence on the draft scheme. However, the SBI board had already given in-principle approval to invest up to 49% in Yes Bank. During the press conference, Kumar acknowledged that there would be some impact on capital adequacy ratio, saying, “There will be a marginal impact on capital ratios due to investment in Yes Bank.”

He also said the moratorium period could be shorter. “I believe Yes Bank can be quickly brought out of the RBI administration. Prashant Kumar is one of the most competent banking professionals,” he added. The regulator on late Thursday night imposed moratorium and capped withdrawal from the bank at Rs 50,000.

“The final board-approved scheme will be announced to the exchanges. Out investment team is working on assessing the balance sheet of Yes Bank. We will work overtime, 24×7, to ensure the resolution plan is approved and implemented much before the 30-day timeline,” he added.

Kumar refused to comment on the issue of AT-1 bondholders not getting paid in the draft reconstruction plan of RBI. He said, “I am sure the regulator would have taken all aspects into consideration.” The RBI’s draft reconstruction plan for YES Bank states that AT-1 bondholders shall not be entitled to get any compensation from the reconstructed bank. The SBI chairman, however, acknowledged that the bank has investment of Rs 1 crore in the bonds of Yes Bank.

Kumar also tried to sooth the nerves of Yes Bank depositors. He said the moratorium limit of Rs 50,000 withdrawal is a short-term pain, while customers money is “completely safe”. “Depositors’ money is not at all at risk. Whatever is proposed, the interest of SBI shareholders will not be compromised,” he added. On a lighter note, he stated that his nephew, too, had an account in Yes Bank and he had told him not to worry.

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