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Now, LIC may be roped in as well to reconstruct Yes Bank
SBI's rescue plan will be known by Monday, says bank chairman
New Delhi: State-owned insurer Life Insurance Corporation (LIC) may consider joining RBI's efforts to rescue Yes Bank. This can help increase capital infusion under the draft scheme to rescue Yes Bank designed by the Reserve Bank of India.
Official sources said the RBI, SBI and Union Finance Ministry officials were in touch with the insurer to see its interest to participate in the scheme. LIC spokesperson, however, could not be reached for comments.
At the end of the December quarter, LIC, which already holds 8.06% in Yes Bank, had an exposure of ₹8,051 crore to the lender's debt instruments Official sources as saying that RBI, SBI and finance ministry officials were in touch with the insurer to see its interest to participate in the scheme. LIC spokesperson, however, could not be reached for comments.
"There are many potential investors who have approached us after seeing the scheme of reconstruction for Yes Bank," said SBI Chairman Rajnish Kumar, adding that SBI's rescue plan for Yes Bank will be known by Monday.
The restructuring plan entails the appointment of a new CEO and board with two SBI-nominated directors, he added. "For LIC, recovery of Yes bank is important it itself has large exposure in bank's debt instruments that has now been downgraded by all rating agencies."
"Our investment is an assurance to depositors and our co-investors," Kumar said. "We are in a comfortable position to inject funds into the bank." SBI said it's willing to invest as much as ₹10,000 crore over time in Yes Bank to keep it operational, stressing that the rescue was not a merger. SBI won't be involved in Yes Bank's daily operations, Kumar said.
Kumar sought to reassure Yes Bank's depositors that their money was "not at all at risk" and that SBI's investment was not against its own shareholders' interests. SBI has made a minimum commitment to own 26% in Yes Bank, Kumar said.
SBI will try to approve the reconstruction of Yes Bank much before the 30-day RBI imposed moratorium ends, Kumar said.
SBI will not be allowed to reduce its stake to below 26% for at least three years. All instruments issued by Yes Bank which qualify as Additional Tier 1 capital will be written down permanently, according to the RBI's plan.
In its draft 'Yes Bank Ltd. Reconstruction Scheme, 2020', RBI said the strategic investor bank will have to pick up 49 per cent stake and it cannot reduce holding to below 26 per cent before three years from the date of capital infusion.
The draft came a day after the RBI imposed a moratorium on Yes Bank, restricting withdrawals to ₹50,000 per depositor till April 3.
If the rumours about LIC's participation are true, it remains to be seen if LIC will bear the burden of 49% stake that SBI intends to pick up or not.
If LIC ends up picking up a stake in Yes Bank, it will come close on the heels of a proposed IPO, which was announced in her annual Budget by Finance Minister Nirmala Sitharaman last month.
