YES Bank eyes own asset reconstruction company, invites EoIs from investors

In April, the RBI formed a 6-member panel headed by Sudarshan Sen, former ED, to carry out a comprehensive review of the working of ARCs in the financial sector ecosystem

Private sector lender YES Bank is looking to set up its own asset reconstruction company (ARC) and has invited an expression of interest (EoI) from prospective investors who could partner with it in setting up this entity.

Through its process advisor, Ernst & Young, YES Bank has called for EoIs from investors with strong financial capability and possessing substantial experience in the distressed asset space.

In a newspaper advertisement, the bank said, “The prospective partners will be the lead partner/ sponsor of the ARC, with the bank as the other significant partner/sponsor, for conducting the business of the asset reconstruction in adherence with existing RBI guidelines governing identification, sourcing, and resolution of stressed financial assets”.

Further, the advertisement said, the prospective investor should have minimum assets under management and funds deployed globally to the tune of $5 billion in the immediately preceding financial year. Also, the investor should have the ability to commit funds for investment or deployment in Indian companies or Indian assets or approximately $0.5 billion.

Apart from that, the investor has to satisfy the Reserve Bank of India (RBI’s) fit and proper criteria, and demonstrate global experience in dealing with distressed assets and have a track record of resolution of distressed assets.

In the past too, the private lender had attempted to set up an ARC so that it could transfer some of its bad assets to that ARC, in an attempt to clean up the balance sheet. But, RBI had reservations about the structure of the ARC that the bank was looking to set up, with itself as the majority owner. This time, the bank is looking to be a minority partner.

Moreover, in April, the RBI formed a six-member panel headed by Sudarshan Sen, former executive director, to carry out a comprehensive review of the working of ARCs in the financial sector ecosystem. The panel is tasked with recommending suitable measures for enabling such entities to meet the growing requirements of the financial sector.