YES Bank hits 5% upper circuit as CARE upgrades debt instrument rating

The revision in the ratings factors in the improvement in the credit profile of the bank post the implementation of the reconstruction scheme, the rating agency said

Shares of YES Bank were locked in 5 per cent upper circuit for second straight day at Rs 13.54 on the BSE on Tuesday after rating agency CARE Ratings upgraded the ratings, with stable outlook, assigned to the bank's debt instruments. Till 02:48 pm, a combined 88 million shares had changed hands and there were pending buy orders for around 47 million shares on the NSE and BSE, exchanges' data show. In comparison, the S&P BSE Sensex was up 1.4 per cent at 43,191 points.

“The revision in the ratings assigned to the debt instruments of YES Bank factors in the improvement in the credit profile of the bank post the implementation of the reconstruction scheme announced by the Reserve Bank of India (RBI) and approved by Government of India (GOI) from March, 2020,” CARE Ratings said in its rationale.

The reconstruction scheme for YES Bank has brought about strong systemic support to the bank by various market participants including GOI, RBI and State Bank of India (SBI) acting in order to protect the depositors’ money by way of providing capital support, liquidity support and reconstitution of the board of directors for better governance, it said.

The ratings remained constrained on account of stressed asset quality parameters as well as expected higher credit costs in the near to medium term on account of the Covid-19 related stress on the advances book. The bank has seen a significant decline in scale of operations with a sizeable decline in its deposit base especially during March 2020 quarter (Q4FY20); however, the bank has been able to increase its deposits during the first half (April-September) of the current fiscal, the granularity and proportion of the low cost Current and Savings Account (CASA) deposits remains moderate. The ability of the bank to grow its scale through build-up of granular advances and broad-based deposit mobilization would be a key monitorable, the rating agency said.