SBI To Invest ₹7,250 Cr To Revive Crisis-Hit Yes Bank

The largest lender in the country, the State Bank of India (SBI) on Thursday confirmed an investment of ₹7,250 crores in the crisis-hit Yes Bank.

The executive board committee of SBI approved the purchase of 7.25 billion equity shares of Yes Bank at ₹10 each, subject to regulatory approval. SBI's stake in Yes Bank will continue within 49% of the paid-up capital of the bank.

As per the rescue plan by the central bank, the SBI is required to maintain a 26 per cent stake in Yes Bank for three years. The idea was to invest a minimum of ₹2,450 crores initially and a maximum of ₹10,000 crores for 49 per cent stake in the bank.

SBI is expecting domestic and foreign investors to add to the equity capital into the bank. HDFC Ltd and Kotak Mahindra Prime will invest ₹2,000 crores in the bank, according to a rescue plan prepared by SBI, Livemint reported.

On March 7, SBI chairman Rajnish Kumar said that 23 investors are keen on investing in Yes Bank and plan to invest more than 5 per cent, which will put them under the 'fit and proper' criteria decided by RBI.

After the crisis hit the country's fifth-largest private lender, the RBI superseded the board of Yes Bank and named Prashant Kumar as an administrator to run the functions after its financial position worsened. The regulator also restricted deposit withdrawals up to ₹50,000 till April 3.

"Taking a conservative view of the stressed pool at Yes Bank ( ₹45,000-₹50,000 crore), we believe the net worth ( ₹27,000 crores) can buffer most of the losses realised from the stress book at the bank. However, capital will still be required to recapitalise it, which in our view could be $2.5-3 billion if AT1 is not converted," a report by JPMorgan on March 5 stated.

Bad Loans Approved By Rana Kapoor

As per the Enforcement Directorate (ED), questioning Yes Bank founder Rana Kapoor, of the ₹42,000 crore loans that turned into bad loans, about ₹20,000 crore was allegedly extended to some corporate companies and Non-Banking Financial Companies (NBFCs) on Kapoor's directions. These details emerged after the ED investigated Kings Group, DHFL Group, Sahana Group, Radius Group, among others.

It was found that the loans were offered after violating the standard procedures of the RBI, which led to a crisis with hefty monetary losses. The ED also identified some shell companies which were allegedly created by Kapoor.

The central agency is now probing Kapoor's role in the disbursal of loans to some corporate entities and alleged payments received in his wife's accounts.

The ED and CBI are probing in connection with transactions to the tune of ₹4,300 crore. The probe against Kapoor began as ED began its inquiry into alleged financial irregularities in the alleged Employees' Provident Fund (EPF) fraud in Uttar Pradesh Power Corporation Limited (UPPCL).

Rana Kapoor was arrested on the second day of interrogation by the ED. He refused to sign the arrest memo and challenged it in the court. He was later put under arrest under the provision of the Prevention of Money Laundering Act (PMLA).

Vadodara Civic Body Shifts Funds From Yes Bank

Five days before the RBI announced that a moratorium was imposed on Yes Bank, citing bank's inability to increase capital, Vadodara Municipal Corporation shifted its entire corpus of ₹265 crores deposited with the bank to Bank of Baroda.

"Our Smart City account was in Yes Bank. As per our rule, we have an internal auditor too who gives us a report every three months. We had received a report three months back that Yes Bank is not financially well so we must go for another nationalized bank," Sudhir Patel, Deputy Municipal Commissioner of Vadodara said.

"It was decided to move to a nationalised bank; the CEO had the power to do that. We contacted all nationalized banks and invited offers from them," Patel added.

Also Read: Anil Ambani Owes Rs 12,800 Crores To Yes Bank, BJP MP Subhash Chandra Rs 8,400 Crores