Yes Bank Rescue Plan By Monday

Yes Bank. (File Photo: IANS) by .
Yes Bank. (File Photo: IANS)

SBI chairman Rajnish Kumar¬†told a press conference in Mumbai that the SBI’s legal team has been doing due diligence on draft scheme proposed by RBI. The Reserve Bank on Friday came out with the “draft reconstruction scheme” under which SBI will bring in Rs 2,500 crore for a 49 per cent stake in the private sector bank…reports Asian Lite News

National Banking Group MD Rajnish Kumar. (File Photo: IANS) by .
SBI chairman Rajnish Kumar. (File Photo: IANS)

SBI chairman Rajnish Kumar on Saturday said the bank has time till Monday to respond back to the Reserve Bank of India (RBI) on the draft scheme for rescue of Yes Bank and it may or may not pick up 49 per cent stake.

“Whether SBI takes a 49 per cent or 26 per cent stake in Yes Bank will depend on the investment involved. We are also examining the interest received from some other investors. SBI board will take the final call on this,” Kumar said.

He told a press conference in Mumbai that the SBI’s legal team has been doing due diligence on draft scheme proposed by RBI. The Reserve Bank on Friday came out with the “draft reconstruction scheme” under which SBI will bring in Rs 2,500 crore for a 49 per cent stake in the private sector bank.

“Don’t believe that our contribution toward Yes Bank will exceed Rs 10,000 crore”, he said.

Kumar said SBI will try to implement the resolution plan before the RBI deadline. Buying a 49 per cent stake in Yes Bank would involve an investment of Rs 2,400 crore, that is if it decides to go alone. Kumar also said many potential investors, 23 in total, have approached SBI after seeing the investment scheme. The minimum investment for SBI would be Rs 5,500 crore if it picks 26 per cent stake in Yes Bank.

“SBI may or may not pick the entire 49 per cent in the bank,” he said.

Yes Bank. (File Photo: IANS) by .
Yes Bank. (File Photo: IANS)

Kumar hoped that SBI would get many co-investors to implement this scheme. He said a credible name was need in this reconstruction effort, which is why SBI has come forward. If SBI goes alone for 49 per cent stake, the bank will invest Rs 2,450 crore in YES Bank.

“Many investors have approached SBI over Yes Bank and Investment decisions are by choice. There are no compulsions. Our board mandate is that we must maintain 0.5 per cent above regulatory minimum capital adequacy. We will continue to do that and have to give assurance to potential investors and depositors. That’s why we are stepping in. There is a certain process which has to be followed when a bank is being reconstructed. It had to be done. There were not many options before RBI and government, which is why, they had to go with this proposal”, he said.

He said SBI has the right to appoint two nominee directors and suggest names for Managing Director and Chief Executive Officer’s role. That will be done.

In its draft ‘Yes Bank Ltd. Reconstruction Scheme, 2020′, RBI said the strategic investor bank will have to pick up 49 per cent stake and it cannot reduce holding to below 26 per cent before three years from the date of capital infusion. The draft came a day after the RBI imposed a moratorium on Yes Bank, restricting withdrawals to Rs 50,000 per depositor till April 3.

“Yes Bank is an entity and Rana Kapoor is an individual. If the individual has done something wrong, they will face the consequences. The institution doesn’t have to suffer for that,” Kumar asserted it is purely an investment from SBI’s standpoint and SBI shareholders’ interest would be fully protected.

Reserve Bank of India (RBI) logo. by .
Reserve Bank of India (RBI) logo.

He said SBI would not seek capital from the government for this investment. The scheme proposes full repayment of all deposits, dilution of equity, and write-off of Rs 10,800 crore of additional tier one (AT-1) bonds. But Kumar did not comment on the 81 bonds being written off in the draft scheme. One of the biggest losers in case the RBI’s restructuring scheme for Yes Bank goes through will be the additional tier-I bond holders who have bets totalling to Rs 10,800 crore on the lender. The investors in such instruments typically include mutual fund houses and bank treasuries.

ED Grills Rana Kapoor

Meanwhile, a day after the Enforcement Directorate registered a money laundering case against Yes Bank founder Rana Kapoor and raided his premises, he was taken to the agency’s office in Mumbai on Saturday for further questioning.

Kapoor, who was grilled by central agency’s officials on Friday night at his Samudra Mahal residence in Mumbai, was shifted to the ED office in the metropolis around 12.30 pm.

MD and CEO of Yes Bank Rana Kapoor during the inauguration of YES I AM THE CHANGE Film Festival at Nehru Center in Mumbai on October 1, 2013. (Photo: IANS) by .
MD and CEO of Yes Bank Rana Kapoor (Photo: IANS)

ED officials said Kapoor was questioned throughout the night, with some rest time.

A senior ED official connected with the probe said: “Kapoor will be questioned about Yes Bank loans to Dewan Housing Finance Limited (DHFL).”

The official said that during searches a lot of incriminating documents were found and the agency wanted to grill him on his links with DHFL promoters and other companies.

Kapoor’s alleged role in the disbursal of loan to a corporate entity and kickbacks reportedly received in her wife’s bank account are also under probe.

LIC may join RBI efforts

State-owned insurer Life Insurance Corporation may consider joining RBI efforts to rescue Yes Bank.

This can help to increase capital infusion under the draft scheme to rescue Yes Bank designed by the Reserve Bank of India.

Official sources said that RBI, SBI and finance ministry officials were in touch with the insurer to see its interest to participate in the scheme. LIC spokesperson, however, could not be reached for comments.

Sources said that in wave of the issues involving burden falling on a single investor to rescue Yes Bank, other investors including LIC is being considered to join with additional equity participation. LIC already holds 8.06 per cent in Yes Bank.

For LIC, recovery of Yes bank is important it itself has large exposure in bank’s debt instruments that has now been downgraded by all rating agencies. At the end of the December quarter (Q3), LIC had an exposure of Rs 8,051 crore to the debt instruments of Yes Bank.

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