Yes Bank fund infusion: Will the Reserve Bank of India’s (RBI) allow foreign capital infusion in crisis-hit Yes Bank? The answer seems “No’ because the current RBI rules do not allow a single investor to hold more than 10 per cent stake in an Indian bank. If we go by the Yes Bank’s claim on foreign fund infusion, the foreign investor will end up with a 25% stake in the expanded equity at an issue price of Rs 100 (for example). And this is way too much but Yes Bank is hopeful that RBI will allow the move. If all goes well, the fund infusion will help the bank get rid of the toxic loans that deepened its crisis.
Yes Bank shares jumped 24 per cent on the Bombay Stock Exchange (BSE) on Thursday after the lender revealed it received a binding offer from a global investor for an investment of $1.2 billion through fresh issuance of equity shares. In August, The bank had raised $275 million by selling shares to domestic investors and FPIs after it witnessed a surge in bad loans and management changes. The foreign fund infusion is expected to help the private sector bank limp back to normalcy.
Trouble began for Yes Bank after the Reserve Bank of India’s (RBI) asset quality review forced it to report previously undisclosed bad loans. The RBI refused to extend Rana Kapoor’s tenure as CEO of Yes Bank as it failed to disclose transactions by promoter entities. As a result, Ravneet Gill from Deutsche Bank was brought in as CEO in March 2019. Reports said the Kapoor family had raised Rs 1,700 crore from Yes Bank.
Yes Bank was in talks with large international private equity funds, Indian family offices, and strategic investors. Hong Kong-based SPGC Holdings had also evinced interest in investing around Rs 8,500 crore in Yes Bank. Apart from SPGC Holdings, Carlyle, Farallon and two family offices were in talks for fund infusion. However, RBI approval is required for majority stake sale in the bank via capital infusion.
Yes Bank Limited, became the country’s first bank to introduce nomination through Facebook Messenger. The private sector bank, which was founded by Rana Kapoor and Ashok Kapur in 2004, operates as a corporate bank. It also provides retail banking and asset management services as subsidiary functions.