Yes Bank, a private lender has its capital levels below the mandatory threshold that is why Reserve Bank has asked private sector lender Yes Bank not to pay interest on tier-II bonds due on June 29.
Yes Bank has interest payments due to 10.25 percent unsecured non-convertible upper tier-II bonds which were issued in 2012 on June 29 and RBI has given the nod to the city-based lender to sought it out.
The bank also informed on Friday that, “The Reserve Bank of India has expressed its inability to accede to the bank’s request for payment of interest due as on June 29, 2020, since the bank does not meet the minimum capital requirements currently. Therefore, the bank would be unable to pay interest/coupon on the said upper tier-II bonds which are due for payment on June 29, 2020,”
As per the memorandum on June 25, 2012, when the issue of the bonds will happen then the interest which was due will be accumulated and it will be paid later once the stipulated regulatory requirements have been complied by the bank.
Yes Bank managing director and chief executive Prashant Kumar said, “the specific features of the instrument require debt servicing to be linked to the bank meeting regulatory norms on capital adequacy,”
Prashant said to meet all its obligations the bank has an adequate amount of liquidity and also the coupon on these bonds is cumulative in nature and once the bank meets its minimum regulatory capital ratio then any unpaid sum will also become payable.
8.5 percent is the bank’s total capital adequacy ratio, which also includes the tier-I ratio at 6.5 percent as of March 31, 2020. To maintain a tier-I ratio above 8.875 percent regulatory requirement used.
Presently bank which had to be bailed out by a State Bank of India -led a consortium of lenders in March is also looking at a capital raise from its new investors up to Rs 10,000-crore and to raise up more, it has to enable resolutions to raise up to Rs 15,000 crore.
On March 5 as part of a scheme decided by the government with the Reserve Bank of India, Yes Bank top management and the board was dissolved by the Union government and as part of the bailout, SBI and other lenders had infused Rs 10,000 crore into it. Additional tier-I bonds worth Rs, 8,400 crores were written down as part of the same scheme.
Yes Bank on the Bombay Stock Exchange on Monday scrip closed 0.89 percent down at Rs 27.75 apiece as against gains of 0.52% on the benchmark.