Yes Bank Ltd. is expected to name the investors and the amount of money they will contribute after its board signs off on the plan at a meeting on Friday.
An
Indian lender that’s creaking under the weight of bad loans and
exposure to the nation’s shadow-banking
crisis is poised to release details of a crucial fund-raising
plan.
Yes Bank Ltd. is expected to name the investors and the amount of money they will contribute after its board signs off on the plan at a meeting on Friday. Then it will be up to the Reserve Bank of India to consider approving the arrangement.
Yes Bank Ltd. is expected to name the investors and the amount of money they will contribute after its board signs off on the plan at a meeting on Friday. Then it will be up to the Reserve Bank of India to consider approving the arrangement.
India’s
fourth-largest private-sector lender aims to raise about $1.2 billion
in capital and says it has received offers from bidders including an
unnamed North American family office. Chief Executive Officer Ravneet
Gill, who is about nine months in the role, has said raising the
money will keep the bank running for the next two years.
RBI
approval is required for stake purchases in Indian banks of more than
5 per cent. Any non-financial entity can buy up to 10 per cent of a
lender, and for a financial entity the cap is 15 per cen. In general
the central bank is reluctant to allow larger stakes, though there’s
a provision to allow a single investor to pick up 40 per cent or more
under special circumstances.
A
notable such exception came three years ago when Canada’s Fairfax
Financial Holdings Ltd. was allowed to buy a 51 per cent stake in CSB
Bank Ltd., then known as Catholic Syrian Bank Ltd. That marked the
first time the central bank let a foreign firm take a majority
interest in a local lender.
Yes
Bank shares have more than doubled since Oct. 1, the best
performance on the benchmark Sensex, giving it a market value of
about $2.5 billion. The rally has pared its decline this year to
about 61 per cent.
With
exposure to several troubled shadow banks, real estate firms and
stressed companies, Yes Bank’s bad loans have risen sharply,
forcing it to step up provisioning and eroding its capital. The
lender’s core equity capital is 8.70 per cent, barely above the
regulatory minimum of about 8 per cent.
Gill
is trying to clean up the bank after the RBI forced his predecessor,
co-founder Rana Kapoor, to step down following a dispute over the
disclosure of bad loans. With 314 billion rupees ($4.4 billion) of
exposure to junk-rated companies, the bank might need more capital to
set aside for defaults in the future.
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