YES Bank rescue plan may cause wider economic pain in the country, says S&P

The risk premiums for AT1 instruments of private sector banks in India will spike in the aftermath of the Yes Bank bailout according to the rating agency

Global Rating agency Standard and Poor's today said a bail-out packege for troubled private lender Yes Bank will keep India banking sector contagion at bay.

However, its rescue plan poses pain for investors in bank hybrid securities, tightening of credit markets. There is possibility of wider economic pain in the country, S&P said in a statement.

The risk premiums for additional Tier 1 (AT1) instruments of private sector banks in India will spike in the aftermath of the Yes Bank bailout. As per the proposed draft reconstruction scheme, Yes Bank's AT1s will be entirely and permanently written down.

Reserve Bank of India and