Statsguru: From SBI to ICICI Bank, lenders come to YES Bank's rescue

The bank, however, could not hide its bad debt under the carpet for long as RBI auditors forced all banks to disclose their bad debts.

The problem at YES Bank was not so apparent till the Reserve Bank of India (RBI) refused to grant an extension to its managing director and chief executive officer Rana Kapoor, back in September 2018. The bank board then hired Ravneet Gill of Deutsche Bank to replace Kapoor. However, the problems started emerging as it struggled to raise capital. The lender started shrinking its loan book since March 2019 (Chart 1), but deposits remained healthy (Chart 2) as the general public was sure that, despite the troubles at the bank, they won’t fail.

The bank, however, could not hide its bad debt under the carpet for long as RBI auditors forced all banks to disclose their bad debts. YES Bank had the highest divergence among private sector banks, and cautioned by the RBI auditors, it started reporting higher bad debt since the September 2018 quarter (Chart 3). Even as the bank struggled to raise capital, its capital adequacy remained strong till the December quarter numbers were disclosed. We now know that the bank under-reported bad debt.

But it all changed after the central bank’s crackdown and the December 2019 quarter results showed the rot in the bank. Capital adequacy ratio plummeted (Chart 4) as the bank had to provide for its huge pile of bad debt, and share price nosedived, sinking the market capitalisation (Chart 5) till the government and the RBI decided to rescue the bank and bring other lenders, including State Bank of India, to put in equity capital (Chart 6). With the moratorium lifted on March 18, YES Bank has restarted its operations as a full service bank. It has enough liquidity to honour its deposits of Rs 1.65 trillion. And the RBI has now opened a credit line of Rs 60,000 crore for the bank to tap.

StatsGuru is a weekly feature. Every Monday, Business Standard guides you through the numbers you need to know to make sense of the headlines. Source: CapitalLine; compiled by BS Research Bureau.

YES Bank looks to contain slippages to around Rs 8,500 crore in FY21

Its standard advances after subtracting net NPAs were about Rs 1.75 trillion at end-December.

After adding Rs 23,000 crore to its gross non-performing assets (NPAs) in the December quarter, ailing YES Bank now says it hopes to contain this slippage to around Rs 8,500 crore in the coming financial year (which begins April 1).

Its standard advances after subtracting net NPAs were about Rs 1.75 trillion at end-December. Advances were Rs 1.86 trillion and net NPAs at Rs 11,114 crore.

The slippage ratio (standard advances becoming NPAs) will be brought to 5 per cent in 2020-21, from 11.98 per cent in the December quarter, according to a presentation for analysts. The vulnerable portfolio, loans that have high chance to slip into NPAs, is Rs 13,911 crore at end of December 2019. These are special mention accounts (SMA) categorised in terms of duration. In the case of SMA -1, the overdue period is between 31 and 60 days. An overdue between 61 to 90 days will make an asset SMA -2.

Gross NPAs at end-December were Rs 40,709 crore, up from Rs 5,159 crore a year before (and Rs 17,134 crore at end-September 2019). With the huge provisioning for bad loans, the bank posted a loss of Rs 18,564 crore in the December quarter.

Provisioning for NPAs and write-offs rose about 10-fold to Rs 22,238 crore in that quarter, from Rs 2,214 crore in the earlier one. It had provided Rs 507 crore on this account in the December quarter of 2018-19.

The Provision Coverage Ratio (PCR) increased to 72.7 per cent for the December quarter, from 43.1 per cent in the September quarter. The higher PCR would enhance the ability to offload these assets from the balance sheet, to further release capital, YES Bank stated in the presentation.

While determining NPAs and related provisioning requirements for October-December, it considered slippage in NPAs after this date till that of the publication of financial results (March 2020), it said. This change resulted in recognition of additional loans of Rs 5,150 crore as NPAs and related provisioning requirement of Rs 772 crore for the quarter.

Additionally, considering the economic environment and significant increase in NPAs, the Bank decided to enhance its PCR on bad loans over and above the Reserve Bank-mandated requirement. As a result, additional provisioning of Rs 15,422 crore for the quarter, it said.

IDFC First Bank plans to invest Rs 250 crore in crisis-hit YES Bank

The authorised capital of Yes Bank has been increased to Rs 6,200 crore, Finance Minister Nirmala Sitharaman said on Friday.

IDFC First Bank on Sunday said it would make an equity investment of Rs 250 crore in beleaguered YES Bank, to acquire 250 million equity shares.

“...duly authorised committee of the Board of Directors of IDFC FIRST Bank had at its meeting held on March 14 accorded approval for an equity investment of up to Rs 250 crore comprising up to 250 million equity shares at a price of Rs 10 each and face value of Rs 2 each, under the proposed Scheme of Reconstruction of YES Bank under the Banking Regulation Act, 1949, subject to regulatory and government approval(s), if any,” the bank said in a BSE filing.

The Centre on Saturday notified the YES Bank Reconstruction Scheme, 2020, a day after the Cabinet approved a reconstruction plan proposed by the Reserve Bank of India for bailing it out. .

The authorised capital of Yes Bank has been increased to Rs 6,200 crore, Finance Minister Nirmala Sitharaman said on Friday.

As per the reconstruction scheme, moratorium on the troubled lender will be lifted on March 18.

Under the plan, state-run SBI will infuse Rs 7,250 crore in the crisis-ridden bank and take 49% equity.

As per the rescue plan, ICICI Bank will invest Rs 1,000 crore, mortgage lender HDFC ₹1,000 crore, Axis Bank ₹600 crore, Kotak Mahindra Bank Rs 500 crore, Bandhan Bank and Federal Bank Rs 300 crore each.

There will be a three year lock-in period for all the investors. However, the lock-in period for SBI would be only for 26 per cent of shareholding. It would be 75 per cent in case of other investors.

Union Cabinet clears draft resolution scheme for YES Bank revival

The scheme was announced a day after the RBI imposed a month-long moratorium on YES bank.

The Union Cabinet on Friday cleared a draft resolution scheme for cash-starved YES Bank, according to TV reports.

Last week, the Reserve Bank of India (RBI) had announced a draft scheme of reconstruction for the lender, according to which the strategic investor in the bank would pick up 49 per cent stake and not reduce holding to under 26 per cent before three years from the date of capital infusion.

The scheme was announced a day after the RBI imposed a month-long moratorium on the bank, restricting withdrawals to Rs 50,000 per depositor till April 3.

State Bank of India (SBI) on Thursday said it would infuse Rs 7,250 crore into ailing YES Bank and pick 7,250 million shares at Rs 10 each, and its shareholding would remain within 49 per cent of the paid-up capital of the private sector lender.

ALSO READ: SBI to invest Rs 7,250 cr in crisis-hit YES Bank as part of RBI rescue plan

“The executive committee of the central board at its meeting on March 11 accorded approval for purchase of 7,250 million shares of YES Bank at a price of Rs 10 a share, subject to regulatory approvals,” SBI said in an exchange filing on Thursday

YES Bank bailout may renew fund, liquidity pressure on NBFIs: Fitch

The move comes even as the impact of coronavirus is beginning to be felt in India, raising further risks to economic growth and NBFI asset quality.

Rating agency Fitch on Wednesday said non-bank financial institutions (NBFIs) in India could face renewed pressure on funding and liquidity following the bailout of ailing private sector lender YES Bank.

The Reserve Bank of India (RBI) hammered out a restructuring package — by roping in State Bank of India and imposing a moratorium on withdrawals — to salvage the private bank.

This could compound the credit squeeze across the country’s financial system, adding to the economic uncertainty, Fitch said.

The move comes even as the impact of coronavirus is beginning to be felt in India, raising further risks to economic growth and NBFI asset quality. Rising asset quality and funding risks will place pressure on ratings if conditions worsen.

The NBFI sector’s direct exposures to YES Bank should be modest, as the bank’s difficulties have been known for some time, and companies have had time to pare back exposure.

YES Bank’s advances to NBFIs were roughly 1-2 per cent of the sector’s total bank funding. Also, the sector’s asset exposures to the bank would similarly be moderate.

YES Bank crisis: Links between BJP & Rana Kapoor well known, says Congress

Congress alleged the loans given by YES Bank rose 100 per cent in just two years after demonetisation from Rs 98,210 crore in March 2016 to Rs 2,03,534 crore in March 2018.

The Bharatiya Janata Party (BJP) government must talk about increase in bad loans at YES Bank in the last five years after Narendra Modi came to power, and should not try to divert public attention, said Congress chief spokesperson, Randeep Singh Surjewala here on Sunday.

Responding to the BJP allegations on YES Bank promoter Rana Kapoor's links with the Congress, Surjewala said the government must answer around Rs 2 trillion rise in YES Bank loan book from Rs 55,633 crore in March 2014 to Rs 2.41 trillion in March 2019, and not obfuscate the real issue of people's money sinking into a bad bank.

The relation between the BJP and Kapoor "is well-known", Surjewala said and added, why did the Prime Minister address a YES Bank-sponsored conference on March 6, despite "the RBI moratorium."

The Congress alleged the loans given by YES Bank rose 100 per cent in just two years after demonetisation from Rs 98,210 crore in March 2016 to Rs 2,03,534 crore in March 2018.

Also, the BJP government of Haryana deposited over Rs 1,000 crore in YES Bank just a month ago, knowing that it was sinking, he said and wondered if Devendra Fadnavis-led BJP government in Maharashtra also deposited money in the private bank.

"How does an M.F. Hussain painting of Rajiv Gandhi sold 10 years ago by Priyanka Gandhi to YES Bank owner Rana Kapoor & disclosed in her tax returns connect with unprecedented giving of loans of Rs 2,00,000 crore in 5 years of the Modi government," Surjewala said responding to a tweet by BJP leader Amit Malviya on the sale and purchase of Rajiv Gandhi's portrait by Hussain.

YES Bank fallout: Axis Trustee Services seeks clarity on AT-1 bondholders

RBI's draft reconstruction scheme for YES Bank suggested a permanent write-down of these bonds outstanding as of March 5.

YES Bank Share : Axis Trustee Services, the debenture trustees for YES Bank’s additional tier-1 (AT-1) bond, has written to the Reserve Bank (RBI) seeking clarity on the fate of the AT-1 bondholders. It also asked for appropriate treatment for them in the larger interest of debt capital markets and future bankfundraising.

RBI’s draft reconstruction scheme for YES Bank suggested a permanent write-down of these bonds outstanding as of March 5. According to the draft, the write-down is “in conformity with the extant regulations issued by the RBI based on the Basel framework”.

“We submit that such write-down of the AT-1 bonds, if given effect to, will be an arbitrary and discriminatory decision. While the Basel-III framework does legally permit write-off of the AT-1 bonds or conversion of such instruments into equity, such power ought not to be exercised in a manner in which preference is given to the common equity holders at the cost of retail as well as other investors who have directly or through mutual fund schemes and regulated financial institutions subscribed to the bonds,” Axis Trustee said.

In a letter to the RBI, Axis Trustee has presented the central bank with alternatives that can be looked at instead of writing down the AT-1 bonds. YES Bank has issued AT-1 bonds worth Rs 8,920 crore.

They have said, since the draft scheme of the RBI for reconstruction of YES Bank sees the matter as a going concern, the bank will always have the discretion to cancel or suspend coupon payments and delay the exercise of call option till the time the financials of the bank improves.

Also, they have said global best practices place equity as subordinate to AT-1 bonds but the RBI should consider the AT-1 bonds at par with equity if not senior. And, the AT-1 bonds can be converted into equity without affecting the size of the stake and value of investment of State Bank of India.

AT-1 bondholders have been holding on to the bonds for the past 3-4 years as long-term investors, the letter said. Moreover, in all the various scenarios in which the bonds can be converted into equity, the bondholders would be subjected to serious loss absorption in the range of 70-80 per cent of face value, however, that would be more equitable and acceptable than the proposed write down.

YES Bank crisis: Rana Kapoor in ED custody, faces Rs 4K-cr kickback probe

12 shell firms, 2 UK assets, 44 paintings under ED scanner; London-bound daughter stopped at Mumbai Airport; CBI books Kapoor and Wadhawan on charges of cheating.

YES Bank Crisis : The Enforcement Directorate (ED) has found that YES Bank co-founder Rana Kapoor and his family set up over a dozen shell firms that were allegedly used for receiving kickbacks to the tune of Rs 4,300 crore and invested in properties illegally.

The agency arrested Kapoor, 62, early Sunday morning in connection with a money-laundering probe — three days after the Reserve Bank put YES Bank under a 30-day moratorium and superseded its board. Kapoor was produced in a Mumbai sessions court, which remanded him in ED custody till March 11. The agency told the court that Kapoor’s custody was required to investigate the role of some companies run by his family members, and are directly and indirectly controlled by him.

“Kapoor obtained undue pecuniary advantage from DHFL (Dewan Housing Finance Corporation) in the matter of investments in the debenture of DHFL by YES Bank, through the companies held by his wife and daughters. It is also apprehended that Kapoor had misused his official position in several other transactions and obtained illegal kickbacks directly or indirectly through entities controlled by him and his family members,” the ED said in the remand to court, which was seen by the Business Standard.

“Prima facie, there appears to be generation and laundering of proceeds of crime to the tune of Rs 4,300 crore by the ‘accused’ persons under Prevention of Money Laundering Act (PMLA), 2002,” the ED said, adding further investigation into the money trail of the proceeds was under progress.

Sources said these firms used the kickback amounts to buy properties valued at Rs 2,000 crore. The current market value of the assets could be more than Rs 5,000 crore, said ED officials.

The agency is in possession of some crucial documents that show Kapoor bought two properties in the UK, and their valuation of which is underway. The probe agency also seized 44 paintings from Kapoor’s residence.

Roshini, Kapoor’s daughter, was stopped by immigration authorities from taking a Mumbai-London flight as a look-out-circular had been issued against Kapoor family members by the ED. The ED started its probe last Friday based on a first information report (FIR) filed by the Central Bureau of Investigation (CBI). The CBI in the FIR alleged Kapoor entered into a criminal conspiracy with DHFL promoters Kapil Wadhawan and others for extending financial assistance to DHFL by YES Bank in lieu of substantial undue benefits to himself and his family members through the companies held by them.

SBI board approves exploring 'investment opportunity' in YES Bank

A salvage plan including SBI and Life Insurance Corporation of India was being talked about and a declaration right now be made soon

Yes Bank Share : The State Bank of India board has given on a fundamental level endorsement to consider a "venture opportunity" in YES Bank. In a late night proclamation on Thursday, SBI, be that as it may, said no choice had at this point been taken to get stake in the bank.

Exceptionally put sources showed a salvage plan including SBI and Life Insurance Corporation of India (LIC) was being talked about and a declaration right now be made soon.

While the better subtleties of the arrangement are being worked out, it is foreseen that both SBI and LIC together will take a 51 percent stake in the bank, with a one-year lock-in period.

LIC as of now possesses 51 percent in IDBI Bank, which it obtained in 2018 to inject capital into the upset loan specialist.

Sources said both the state-possessed associations would hold the offers as speculation. LIC as of now possesses 8 percent in the private loan specialist.

The sources said YES Bank needed to practice its call choice on ceaseless bonds or extra level 1 (AT1) obligations of Rs 80 crore on March 5. "The bank hasn't practiced its call choice," said a source. Inability to have met the bond commitment is said to be the trigger for the purposeful activity.

As of late, CARE Ratings downsized YES Bank's appraising on bonds worth Rs 21,016 crore to acknowledge watch for negative ramifications. These bonds were at that point put under negative rating.

On the salvage plan, specialists said the need is rebuild the asset report. "Resources should be brought down to feasible worth and that overview will demonstrate how a lot of capital is required for the bank," said a financial advisor.

All may not be lost for YES Bank but insiders say its recovery to be slow

It will rely upon the obtaining bank or money related foundation's ability to hold the benefits till the market improves and sell them later to recuperate sizeable lump of the credits.

YES Bank Crisis : All may not be lost for emergency hit YES Bank with banking industry insiders calling attention to that the bank has rock solid insurance against advances.

It will, thusly, rely upon the procuring bank or monetary establishment's ability to hold the benefits till the market improves and sell them later to recuperate sizeable lump of the credits.

For example, if security is a private structure, it may not bring great cost in a discouraged market.

Yet, given that a portion of the enormous budgetary foundations, for example, IL&FS and DHFL have fell as of late, the market may not react well to YES Bank.


"This is the explanation we expect recovery of YES Bank to be extremely moderate," a Mumbai-based bank official said.
Indeed Bank had before put forth all potential attempts to raise development capital however hopelessly fizzled. Since the main private bank is very nearly breakdown, the administration has bumped the SBI to frame a consortium and salvage the bank.


The RBI, as controller, has come vigorously and finding a way to guarantee the bank makes a turnaround.
The circumstance at the YES Bank has arrived at disturbing level constraining the RBI to supplant its board. A breaking point has additionally been forced on withdrawal of stores in overabundance of Rs 50,000.


There is a developing recognition in the market that a sizeable piece of YES Bank's credits have transformed into non-performing resources (NPAs) which are not recoverable. This will prompt disintegration of its advantages yet given that the bank, before, took substantial guarantee for loaning, the market anticipates that the gaining element should recoup some portion of the credits by selling the benefits.

"Advances are unquestionably transforming into NPAs however does the basic security have showcase esteem and to what degree, would they be able to be recouped? What one sees is that bank has just made arrangements for awful credits however the bank has the option to sell the advantages sold with it," another financial industry official said.
The administration is found out to have requested that the SBI lead a consortium to purchase stake in YES Bank. This signals the legislature won't permit the bank to come up short.