National Desk: State Bank of India (SBI) played the role of a ‘White Knight’ for Yes Bank once again. Earlier this year, SBI came to rescue the troubled private sector lender. As part of a rescue package, SBI first injected ₹ 6,050 Crores into Yes Bank in exchange for a 48.2% stake.
But that’s not all. Former Deputy Managing Director of SBI, Prashant Kumar is now on the steering wheel of Yes Bank. Also according to sources, Yes Bank’s wholesale loan portfolio has found a ready buyer in SBI.
SBI is now all set to invest another ₹ 1,760 Crores in the private sector lender’s follow-on public issue scheduled later this month. Yes Bank also said that it aims to raise ₹ 15,000 Crores through the FPO. If successful, SBI’s stake will be diluted considerably.
As of now, SBI can be expected to play a key role in the private sector bank’s ongoing survival. The rehabilitation of Yes Bank involves SBI to hold 26% for three years. Besides SBI, six other banks and two financial institutions also infused money. All investors are required to hold Yes Bank shares for three years minimum.
Prashant Kumar said that he had his hands full in cleaning up the balance sheet since he took over in March. More than 18% of the lender’s book had turned bad as of end-March.
The ongoing COVID-19 pandemic has also increased the trouble for Yes Bank. In Fiscal Year 20 (FY20), the bank’s deposit dropped by a massive 54% while loan book shrank by 29%.
The bank’s Common Equity Tier-1 ratio was 6.3% after the rescue capital infusion. Analysts estimate the bank needs ₹15,000-20,000 Crores capital to meet regulatory minimum requirements as also provisioning needs.
One can clearly say that SBI will still need to keep infusing money until Yes Bank is able to reduce the level of stress on its book.