A Reserve Bank of India-backed proposal to rescue embattled Yes Bank Ltd has been approved and withdrawal limits will be lifted, officials said, as India’s fourth-largest private lender posted a big quarterly loss.
Yes Bank was struggling with bad loans and on the brink of collapse when the central bank seized control of the lender on March 5 and imposed withdrawal limits for customers.
Eight banks — led by the country’s largest lender, the State Bank of India (SBI) — committed to investing in the plan, which has been approved by the Indian government, Yes Bank said in a regulatory filing on Saturday.
The withdrawal limits for customers would be lifted tomorrow, it said.
“We are an integral part of the financial system and we must support other banks that have gone into difficulty,” Deepak Parekh, chairman of the Housing Development Finance Corp Group, one of the lenders investing in Yes Bank, told the Times of India on Sunday.
“The difficulty may be due to any reason, but there are a large number of depositors, borrowers and employees. We are reasonably confident that the bank will be revived,” Parekh said.
SBI had announced on Thursday that it would invest 72.50 billion rupees (US$977 million) in the troubled lender.
The announcement came as Yes Bank on Saturday reported a net loss of 185.6 billion rupees in the three months to Dec. 31 last year, compared with a profit of 10.2 billion rupees in the previous corresponding period.
Deposits totaled 1.37 trillion rupees as of March 5 — when Indian authorities took control of the bank — down 17 percent from the start of the year, Yes Bank said in a statement on Saturday.
That followed a 26 percent year-on-year slide in the three months through December last year.
Yes Bank’s provisions climbed to 247.7 billion rupees in the quarter ended Dec. 31 from 13.36 billion rupees in the previous three-month period and only 5.5 billion rupees a year earlier, Yes Bank said.
Its gross bad-loan ratio as a share of total loans was 18.9 percent in the December quarter, up from 2.1 percent a year earlier.
The bank on Thursday is to be removed from several NIFTY indices, the National Stock Exchange of India Ltd said in a statement yesterday.
India’s financial system had been hit by liquidity concerns more than a year after the near-collapse of Infrastructure Leasing & Financial Services Ltd, one of the nation’s biggest “shadow banks” — finance houses responsible for significant consumer lending.
A resulting reluctance of banks to lend money has exacerbated the woes of Asia’s third-biggest economy, with growth remaining sluggish.
Additional reporting by Bloomberg
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