MUMBAI, Maharashtra, India - Shares of Yes Bank dropped by 14.41 per cent on Wednesday afternoon even as ICRA upgraded its commercial papers and placed them on rating watch with developing implications.
ICRA said the ratings upgrade factors in removal of the moratorium from March 18 which was earlier imposed on Yes Bank Ltd (YBL) by the Central government, thereby restricting payments to its depositors and creditors.
The government has also approved the reconstruction scheme for the bank, based on which YBL has received equity of Rs 10,000 crore from State Bank of India (SBI) which is now holding 48.2 per cent stake and other domestic financial institutions.
Apart from the equity infusion, YBL's board has also been reconstituted with a new Managing Director and CEO from SBI.
As per the terms of the reconstruction, SBI will initially hold not more than 49 per cent stake (subject to a minimum of 26 per cent to be held for a period of at least three years).
"ICRA derives comfort from the new shareholding and the reconstitution of bank's board."Along with the equity infusion of Rs 10,000 crore, YBL's Basel III additional tier 1 (AT-I) bonds of Rs 8,415 crore have been written down. This has helped improve the tier 1 capital ratios above the regulatory requirements.
Additionally, with the removal of the moratorium, the bank may witness deposit withdrawals for which liquidity support is to be provided by domestic financial institutions and the Reserve Bank of India (RBI) if required, said ICRA.
However, a sustained decline in scale of operations, leading to a delayed improvement in operating profitability, and the inability to reduce reliance on wholesale funding over the medium term will be key negative triggers.
YBL's inability to raise sufficient capital to meet the regulatory ratios including capital conservation buffers on a sustained basis will also be a credit negative, said ICRA.
At 12:25 pm, shares of Yes Bank were trading 14.41 per cent lower on BSE Ltd at Rs 30 per unit. (ANI)