YES Bank plans to raise Rs 20,000 crore through certificate of deposits

CRISIL has assigned 'A2' rating to the programme

Ailing private lender YES Bank will hit the market with certificate of deposits (CDs), a money market instrument, to raise up to Rs 20,000 crore from institutional players, mostly banks. 

This is the first large-scale (short-term) fundraising effort by the bank after being bailed out under a reconstruction scheme.  

Rating agency CRISIL has assigned ‘A2’ rating to the Rs 20,000 -crore CDs programme of YES Bank. The instruments carrying this rating are considered to have strong degree of safety regarding timely payment of financial obligations. Such instruments carry low credit risk, CRISIL said in a statement.

The rating factors in the expectation of continued extraordinary systemic support from key stakeholders, along with sizeable ownership of State Bank of India (SBI).

YES Bank witnessed a steady outflow of deposits in the past few quarters given the challenges faced by it and the adverse news reports with respect to the bank.

Between December 31, 2019, and March 5, 2020, the deposit base shrunk by around Rs 28,000 crore. Since March 31, 2018, the deposit base has declined by over Rs 63,000 crore.

Nevertheless, the bank added depositors even in recent quarters. 

The bank has also been in touch with existing depositors to address concerns. Key stakeholders have provided public assurances regarding the safety of deposits in YES Bank.

Given the recent events, it remains to be seen whether there is any significant withdrawal by depositors after the moratorium was lifted. 

Nevertheless, liquidity support measures provide a good mitigant to significant withdrawals, CRISIL said.

The bank’s liquidity coverage ratio was 74.6 per cent as on December 31, 2019, against the regulatory requirement of 100 per cent.

The CRISIL report said it understands that the ratio has improved as on latest date supported by capital infusion into the bank. Also, as on the latest date, the bank’s statutory liquidity ratio is also in line with regulatory requirements.