Yes Bank Crisis Forces Total Write-Down Of AT1 Bonds Worth Rs 8,415 Crore

The crisis at beleaguered Yes Bank has forced total write-down of AT1 bonds worth Rs 8,415 crore. The measure is being taken due to the financial emergency that hit the erstwhile market leader in private banking. The write-down would turn the bonds into zero. According to the filing by Yes Bank in the Bombay Stock Exchange, the step was being taken as per the globally accepted Basel-III norms. The write-down comes 10 days after the Reserve Bank of India said that “No accountholder shall be entitled to get any compensation from the reconstructed bank on account of the changes occurred in the reconstructed bank by virtue of the scheme." On Monday, shares of Yes Bank  jumped sharply by over 58 per cent after the Union Cabinet on Friday approved reconstruction scheme for the stressed lender. The scrip witnessed a strong comeback and zoomed 58.12 per cent to Rs 40.40 on the On the NSE, it climbed 58.12 per cent to Rs 40.40.

112.78 lakh shares were traded on the BSE and 9.55 crore shares changed hands on the NSE during the day. Finance Minister Nirmala Sitharaman said the union cabinet has approved the reconstruction scheme for Yes Bank as suggested by the Reserve Bank. On March 5, the Reserve Bank of India (RBI) imposed a moratorium on Yes Bank, restricting withdrawals to Rs 50,000 per depositor till April 3.

The RBI also superseded the board and placed it under an administrator, Prashant Kumar, former deputy managing director and CFO of State Bank of India (SBI). Giving details about the scheme, Sitharaman said SBI will invest for 49 per cent equity in Yes Bank and other investors are also being invited. SBI has invested Rs 6,050 crore in crisis-ridden Yes Bank. ICICI Bank, Housing Development Finance Corp (HDFC), Axis Bank, Kotak Mahindra Bank, Bandhan Bank, Federal Bank and IDFC First have also joined the SBI-led consortium and invested in Yes Bank. The cash-strapped lender had on Saturday reported Rs 18,564 crore loss in December quarter.

Its gross non-performing assets also shot to 18.87 per cent in December 2019 quarter against 2.10 per cent in the year-ago. "Lifting of deposit withdrawal moratorium on 18th March could open flood gates and will require a calibrated approach along with active support and signalling from the RBI, government and investor banks," said a report by Emkay Global Financial Services. The reconstituted bank board too may need more turnaround experts and eminent bankers,it said. PTI SUM   State Bank of India Chairman Rajnish Kumar on Monday said investments by banks in crippled Yes Bank are being made to maintain financial stability in the system, and not guided by the principle of return on investment (RoI)." 

"The decision of the State Bank of India (SBI) and all other banks coming together, it is not guided by the return on capital principles or investments. It is all guided by providing stability to the financial system," Kumar said. The scrip made a weak debut at bourses, plunging nearly 13 per cent, against its issue price of Rs 755. SBI has invested Rs 6,050 crore in crisis-ridden Yes Bank.

HDFC will invest Rs 1,000 crore in Yes Bank through a purchase of 100 crore shares. Axis Bank will invest Rs 600 crore by buying 60 crore shares and Kotak Mahindra Bank Rs 500 crore through 50 crore shares. Bandhan Bank will invest another Rs 300 crore through the purchase of 30 crore shares. IDFC First and Federal Bank have invested Rs 250 crore and Rs 350 crore, respectively, in the lender.

(With agency inputs)