Due diligence on investment in Yes Bank on: SBI

Mumbai: SBI chairman Rajnish Kumar on Saturday said the bank has time till Monday to respond back to the Reserve Bank of India (RBI) on the draft scheme for the rescue of Yes Bank and it may or may not pick up 49 percent stake.

“Whether SBI takes a 49 percent or 26 percent stake in Yes Bank will depend on the investment involved. We are also examining the interest received from some other investors. SBI board will take the final call on this,” Kumar said.

He told a press conference in Mumbai that the SBI’s legal team has been doing due diligence on the draft scheme proposed by RBI. The Reserve Bank on Friday came out with the “draft reconstruction scheme” under which SBI will bring in Rs 2,500 crore for a 49 percent stake in the private sector bank.

“Don’t believe that our contribution toward Yes Bank will exceed Rs 10,000 crore”, he said.

Kumar said SBI will try to implement the resolution plan before the RBI deadline. Buying a 49 percent stake in Yes Bank would involve an investment of Rs 2,400 crore, that is if it decides to go alone. Kumar also said many potential investors, 23 in total, have approached SBI after seeing the investment scheme. The minimum investment for SBI would be Rs 5,500 crore if it picks a 26 percent stake in Yes Bank.

“SBI may or may not pick the entire 49 percent in the bank,” he said.

Kumar hoped that SBI would get many co-investors to implement this scheme. He said a credible name was needed in this reconstruction effort, which is why SBI has come forward. If SBI goes alone for a 49 percent stake, the bank will invest Rs 2,450 crore in YES Bank.

“Many investors have approached SBI over Yes Bank and Investment decisions are by choice. There are no compulsions. Our board mandate is that we must maintain 0.5 percent above regulatory minimum capital adequacy. We will continue to do that and have to give assurance to potential investors and depositors. That’s why we are stepping in. There is a certain process that has to be followed when a bank is being reconstructed. It had to be done. There were not many options before RBI and government, which is why they had to go with this proposal”, he said.

He said SBI has the right to appoint two nominee directors and suggest names for Managing Director and Chief Executive Officer’s role. That will be done.

In its draft ‘Yes Bank Ltd. Reconstruction Scheme, 2020′, RBI said the strategic investor bank will have to pick up 49 percent stake and it cannot reduce holding to below 26 percent 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 Rs 50,000 per depositor till April 3.

“Yes Bank is an entity and Rana Kapoor is an individual. If the individual has done something wrong, they will face the consequences. The institution doesn’t have to suffer for that,” Kumar asserted it is purely an investment from SBI’s standpoint and SBI shareholders’ interest would be fully protected.

He said SBI would not seek capital from the government for this investment. The scheme proposes full repayment of all deposits, dilution of equity, and write-off of Rs 10,800 crore of additional tier one (AT-1) bonds. But Kumar did not comment on the 81 bonds being written off in the draft scheme. One of the biggest losers in case the RBI’s restructuring scheme for Yes Bank goes through will be the additional tier-I bondholders who have bets totaling to Rs 10,800 crore on the lender. The investors in such instruments typically include mutual fund houses and bank treasuries.


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