SBI Ensures Yes Bank Revival Plan Implementation Before Moratorium Period

The State Bank of India (SBI) on Saturday said that the extent of its investment in Yes Bank will be informed to the exchanges by 9 March in response to Reserve Bank of India's draft reconstruction scheme, after the bank's internal investment and legal teams complete their due diligence on the private bank.

Chairman Rajnish Kumar clarified at a press conference held in Mumbai on Saturday that there are no plans to merge and the 49 percent investment in Yes Bank is the upper limit as per RBI's draft scheme. Kumar also said that SBI would ensure the resolution plan is approved and implemented much before the 30-day period that ends on 3 April 2020.

"The final board approved scheme will be announced to the exchanges. Our investment team is working on assessing the balance sheet of Yes Bank. We will work overtime, 24x7, to ensure the resolution plan is approved and implemented much before the 30-day timeline," Kumar said.

On Thursday, RBI placed Yes Bank Ltd under an order of moratorium up to 3 April 2020. The central bank also issued a draft 'Yes Bank Ltd. Reconstruction Scheme, 2020' wherein it said that SBI has expressed its willingness to make an investment in Yes Bank and participate in its reconstruction scheme.

The draft scheme proposes that SBI would have to hold a minimum of 26 percent stake in the reconstructed bank for a period of 3 years from the date of infusion of capital. It could hold a maximum of 49 percent shareholding in the reconstructed bank post-infusion at the minimum price of Rs 10 per share.

"The only requirement is the lock of 26 percent for three years. This sets the boundary. This is an obligation, anything above that would be a requirement and would depend on what others invest," he said.

On the quantum of investment by SBI, Kumar refused to confirm stating that the bank's internal investment and legal teams are currently performing due diligence and will respond to RBI with its comments on 9 March.

"RBI will increased authorised equity shares to 2,400 crore for the face value of Rs 2 each, which brings the authorised capital to 4,800 crore. If we presume that SBI takes on 49 percent stake that would be 245 crore shares at Rs 10, which would put immediate investment requirement at Rs 2,450 crore," he added.

"Whether SBI takes a 49 percent or 26 percent 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," he said.

RBI's reconstruction scheme involves increasing the authorised capital of Yes Bank to Rs 5,000 crore from Rs 800 crore. The scheme also proposes full repayment of all deposits, dilution of equity, and write-off of Rs 10,800 crore of additional tier one (AT-1) bonds. Kumar refused to comment on the 81 bonds being written off in the draft scheme.

Kumar said that from SBI's standpoint, it is purely an investment and the public sector bank may or may not pick the entire 49 percent stake. Further, he hopes the bank gets many co-investors to implement the scheme.

As a credible name was needed in the reconstruction of Yes Bank, SBI has come forward, Kumar said. There would be no conflict of interest in the Yes Bank investment as Kumar assured that SBI would not be involved in in the day-to-day management of the private lender.