YES Bank looks to recover Rs 8,500 cr from loan defaulters in next fiscal

YES Bank is hoping to recover about Rs 8,500 crore from its loan defaulters, mostly corporate entities, in the coming financial year (which begins April 1), said the bank’s administrator on Tuesday. 

In the December-quarter results, which the bank announced last week,its gross non-performing assets (NPAs) more than doubled to Rs 40,709 crore from Rs 17,134 crore in September.

Addressing the media a day ahead of the lifting of a moratorium on YES Bank’s operations, administrator Prashant Kumar said the bank had made adequate preparations for any surge in withdrawal of deposits.

“All our ATMs and branches are sufficiently filled with cash and we will not need any external liquidity support. But, if the need comes, we have lines available,” he said. 

He added that only a third of customers have withdrawn the entire amount of Rs 50,000 allowed during the moratorium. “We have had higher inflows than outflows in the last few days,” Kumar said. 

He assured that complete normalcy will be restored. RBI Governor Shaktikanta Das had on Monday assured liquidity support if the need arose. Going forward, the bank will work to move away from dependence on bulk deposits. 

In the December-quarter results, which the bank announced last week,its gross non-performing assets (NPAs) more than doubled to Rs 40,709 crore.

“Our first priority will be to build a granular deposit base and then we would look to make our loan book 60 per cent retail (individuals and small borrowers) and 40 per cent corporate. Currently, it is 60 per cent corporate and 40 per cent retail,” said Kumar. 

SBI, leading the rescue package, will continue to hold about 49 per cent in the ailing lender for three years. According to the reconstruction scheme, the former is also bound by a three-year lock-in clause, when it cannot sell any YES share. "In three years, we would expect a decent investment return. It should be seen that nobody is allowed to do profiteering," said SBI Chairman Rajnish Kumar.
 

YES Bank’s shares rallied 58 per cent on Tuesday to close at Rs 58.65 on the BSE. Rajnish Kumar said, “Let us wait and see how the price turns out to be and we should not read too much into today’s price.”

SBI has also recommended Partha Pratim Sengupta and Swaminathan Janakiraman to the board of YES Bank. SBI can nominate two members to the new board of the private lender. YES Bank has also written off the entire outstanding additional tier-1 bonds of Rs 8,415 crore and a lot of investors have sued the bank, demanding that a part of the bonds be converted into equity. “The matter is sub-judice,” said Prashant Kumar.  

Stock zooms 58%

On the initial capital raising plans, the SBI chairman said enough money was available but a decision was taken that the first stage of funding would be aided by domestic banks.  "Within the short time frame, a lot of international investors had shown interest (in taking equity stake) but that would have meant we keep the bank under moratorium for a longer period of time. We wanted to lift the moratorium as soon as possible and normalise the situation," he said.

“Instead of raising the entire capital in one go, it can be a two-stage process and this raising of Rs 10,000 crore makes sure that the bank is meeting all the capital adequacy ratios,” he added.

The current capital raising will take care of the regulatory requirements of minimum capital. Rajnish Kumar said the bank is working on a plan to raise another Rs 10,000 crore in the second tranche during Q1. The administrator said: “Eighty per cent of the capital raised in the second tranche will be used for growth.” On re-examination of stressed loan accounts, Prashant Kumar said there was absolutely no need for any forensic audit. The bank, he said, had already done an extensive analysis of each such loan. 

YES Bank plans to bring the slippage ratio (standard advances becoming NPAs) to 5 per cent in 2020-21, from 11.98 per cent in the December quarter. “Five per cent slippage ratio is very conservative. This would mean about Rs 8,500-crore slippages, but our expectation is that our recovery during the financial year will completely take care of this,” Prashant Kumar said.

With the huge provisioning for bad loans, the December quarter's loss was Rs 18,564 crore.

Near-term priorities

*Retail deposit mobilisation

*Focus on retail loans including MSME

*Quick resolution of stressed assets

*Cost optimisation

*Maintaining digital banking leadership