NEW DELHI: The RBI's draft 'Yes Bank Ltd Reconstruction Scheme', 2020, announced on Friday said that the SBI has expressed willingness to invest in Yes Bank.
It is likely to pick up a 49 per cent stake and pump in equity capital to revive the ailing private sector lender.
As per preliminary estimates, SBI may fork out roughly Rs 2,400 crore in lieu of the 49 per cent stake but cannot reduce its holding below 26 per cent for three years from the date of capital infusion.
As part of the proposed scheme, Yes Bank’s authorised capital will be altered to Rs 5,000 crore and paid-up capital to Rs 4,800 crore. For 49 per cent stake, SBI's proposed capital infusion will be roughly Rs 2,400 crore at not less than Rs 10 per share (premium of Rs 8 per share), as per RBI's draft reconstruction scheme.
According to sources, Yes Bank's capital requirements, which the previous management pegged at $2 billion, are unclear as the Q3 financials have not yet been disclosed. "We can expect a rights issue later if the investors find the need for more capital. New investors (SBI) will have to hold 26 per cent for three years, but it can dilute up to 23 per cent and raise capital," an official told Express.
Interestingly, Yes Bank's Additional Tier 1 capital (roughly Rs 8,800 crore) issued under Basel III framework will be written off permanently and no account holder will be entitled for compensation from SBI.
These are bonds (otherwise debt) issued by banks to raise capital to meet the Basel III requirements. Essentially, when debt is written off, it'll become equity and in this instance, improve Yes Bank's core equity and reduce its capital requirement.
At about Rs 8,800 crore, they translate to 4 per cent of Yes Bank's capital ratio of risk-weighted assets, and a write-down bumps up the bank's capital adequacy ratio by 4 per cent.
Sources said this was one of the key conditions put forth by potential investors in the bank. Besides, investors also sought writing down tier-II bonds aggregating Rs 14,000 crore. "Good thing is, as per the draft scheme in the near-term, there's no redact on tier-II bonds," the official added.
Typically, additional tier-I bonds bear higher interest and come with high risk, where financially struggling banks don't repay bondholders.
Meanwhile, the RBI-appointed administrator on Yes Bank will step aside and a new board comprising a CEO & MD, one non-executive chairman, two non-executive directors and two nominee directors of the SBI will take over. The board members will continue in office for one year or until an alternate board is constituted by Yes Bank through the normal procedure laid down in its Memorandum and Articles of Association, whichever is later.
Announcing the scheme, Finance Minister Nirmala Sitharaman said there won't be any layoffs and all employees will continue on the prevailing terms and conditions. Similarly, there won't be any branch rationalization.
Meanwhile, Prashant Kumar, Administrator, Yes Bank, said the current moratorium was to protect depositors’ interest and restore confidence.
"A solution is being worked upon to revive the bank well before the moratorium period of thirty days ends. The bank is also taking necessary steps to ensure seamless transactions for customers. We assure the depositors that their money is safe and there is absolutely no reason to panic. Look forward to continued support from depositors," he said.