Govt approves plan for SBI-led consortium to buy stake in YES Bank: Reports

The government has approved a plan for State Bank of India to lead a consortium that will buy stake in YES Bank, people in the know have told Bloomberg. SBI has also been authorised to pick other members of the consortium.

YES Bank has struggled to raise capital it desperately needs to stay above regulatory requirements as it battles high levels of bad loans due to its exposure to troubled sectors. The lender has been trying to raise $2 billion in fresh capital for two quarters.

In January, the bank said it had rejected a $1.2 billion investment offer from Canadian investor Erwin Singh Braich and Hong Kong-based SPGP Holdings - an offer about which many analysts had expressed doubt.

Yes Bank said in February that it will delay its December-quarter results by at least a month.

Earlier in February, the bank scaled down its fundraising plan substantially to Rs 10,000 crore, from nearly to $2 billion approved by the board in November, as it continued with its struggle to get investors. It would raise the money, in one or more tranches, through Qualified Institutions Placement, Global Depository Receipts, American Depository Receipts, Foreign Currency Convertible Bonds, or any other methods on a private placement basis.

In January,  the rating agency India Ratings and Research (Ind-Ra) maintained YES Bank’s long-term issuer rating of ‘IND A’ on rating watch negative (RWN) and withdrawn its short-term issuer rating of ‘IND A1’.

How crisis at YES Bank unfolded

The crisis at YES Bank started way back in 2018 when the Reserve Bank of India in September 2019 cut short the founding promoter Rana Kapoor’s new three-year term as CEO of the bank till January 31, 2019. YES Bank's shares tanked 30 per cent the next day and continued the downward spiral.

Later in September 2019, Rana  Kapoor said he had the interest of the shareholders in his mind and would never sell his promoter shares. Instead, he would pass on them to his daughter. 

In October, the RBI refused to Rana Kapoor more time and asked the promoters of the bank to find a new CEO. All this led to poor quarterly results and the asset quality deteriorated. 

YES Bank said that it has huge exposure to debt-laden Infrastructure Leasing and Financial Services (IL&FS). Ashok Chawla resigned from YES Bank's board, while Vasant Gujarathi too stepped down as independent director. In November 2018, Independent director Rentala Chandrashekhar resigned. 

In the same month, Moody's downgraded the bank's rating, owing to the resignations from the board. 

On March 1, 2019, Ravneet Gill took charge as MD and CEO. Four days later, on March 5, 2019, the Reserve Bank fined the bank Rs 1 crore for non-compliance of SWIFT operations. Situation grew grim as in April 2019, reports emerged that Securities and Exchange Board of India might probe the bank for alleged insider trading.