Moody's upgrades YES Bank's rating by a notch; changes outlook to positive

Global rating agency Moody's on Wednesday upgraded Yes Bank's rating by a notch to B2 as its financial parameters have improved.

The long-term foreign currency issuer rating and long-term foreign and local currency bank deposit ratings of the bank has been raised to B2 from B3, Moody's said in a statement.

At the same time, Moody's has changed the outlook on Yes Bank's ratings where applicable to positive from stable, reflecting Moody's expectation of a further improvement to the bank's credit profile, driven by a cleanup of legacy stressed assets and/or improvements to its capital and profitability, it said.

The rating action is because of substantial improvement in funding and liquidity position, it said, adding this has strengthened depositor and credit confidence in the bank.

The rating action also reflects the fact that despite the significant economic challenges since the onset of the pandemic, Yes Bank's asset quality has deteriorated only modestly while its capital has remained stable, it added.

Moody's could downgrade the bank's ratings and Baseline Credit Assessment (BCA) if its capital deteriorates significantly because of a strain on its asset quality, or if its funding and liquidity deteriorate.

Yes Bank came under financial stress last year. The Reserve Bank India on March 5, 2020, imposed a moratorium on troubled lender YES Bank and capped withdrawals at Rs 50,000. Subsequently restructuring plan notified by the government on March 13 leading to lifting of moratorium on March 18, 2020.