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Icra downgrades YES Bank’s Rs 52,600 crore bonds to ‘default’

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NEW DELHI: Rating agency Icra on Friday downgraded YES Bank’s debt instruments worth Rs 52,611.70 crore to ‘default’ after the cash-strapped lender was placed under a 30-day moratorium by the Reserve Bank of India. “The ratings downgrade factors in the moratorium placed on the bank by the central government, whereby the bank’s payments to its depositors and creditors is now restricted,” Icra said. The Reserve Bank of India (RBI) in consultation with the central government has also superseded the board of the bank due to deterioration in the bank’s financial position. The bank had not paid the coupon on the Basel II Tier I bond due on March 5, which was subject to the bank meeting the regulatory capital adequacy ratio (CAR).

The coupon payment on these bonds also required prior approval of RBI in case such payment of coupon results in an increase in net loss. The bank in its last results for H1FY20 had declared a CAR of 16.30 per cent and loss of Rs 486 crore, however, it deferred its Q3FY20 results. In Icra’s view, restricted payments during the moratorium period severely constrains the ability of the bank to service its liabilities in a timely manner.

The terms of proposed reconstitution or amalgamation of the bank will remain the key determinants of the future rating actions on the above instruments. “The worsening in credit profile of its large borrowers led to sharp increase in its level of stressed assets in relation to its core capital.

Further, the limited resolution on these stressed assets till date and the bank’s inability to raise sufficient capital in a timely manner has further weakened its financial profile,” the rating agency said.




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