RBI bars YES Bank from coupon payment on Upper Tier II bonds

The private lender had approached banking sector regulator RBI seeking approval to pay interest due as on June 29, 2020 for Upper Tier II Bonds

The Reserve Bank of India (RBI) has restrained YES Bank from paying interest (coupon) on upper tier-II bonds as its capital adequacy ratio is below regulatory requirements, the private sector lender has informed the BSE.

The bank had approached the RBI seeking approval to paying interest due as of June 29 for upper tier-II bonds. These unsecured non-convertible upper tier-II bonds carry coupon of 10.25 per cent. 

Its overall capital adequacy ratio stood at 8.5 per cent at the end of March, below the regulatory requirements of 11.5 per cent, with common equity tier-I (CET-I) of 6.3 per cent. Its stock on Monday closed 0.9 per cent lower at Rs 27.75 per share on the BSE. 

The interest amount due and the remaining unpaid shall be accumulated and be paid later, subject to the bank complying with the stipulated regulatory requirement, the lender said. The bank’s shareholders on Monday approved raising capital of up to Rs 15,000 crore to enhance capital adequacy ratio, support growth and create buffers for Covid-19.

This fundraising from markets would further be aided by sources of organic capital (internal generation). The bank plans to do so by resolution of stressed asset resolution and asset sell-down. 

The deferred tax asset of Rs 6,118 crore deducted from net-worth for computing CET-1, representing about 2.55 per cent in CET-1, could potentially be available to the bank over time, according to bank presentation.