Rating agency ICRA has upgraded ratings of Yes Bank’s securities. The rating upgrade factors in the sizable capital raise of Rs 15,000 crore in July 2020, which has resulted in an improvement in the capital ratios of Yes Bank, stated the rating agency.
At present, the agency stated the capital ratios are now comfortably above the regulatory levels.
The agency also factored in the improvement in the bank's liquidity position after the stability and subsequent increase in its deposit base. Besides, the bank recently fully repaid the Special Liquidity Facility (SLF) extended to it by the RBI.
Factoring in the COVID-19 impact, the agency stated, the bank management has guided towards a slippage of around 5 per cent in FY2021. “Despite having the flexibility to restructure loans, ICRA estimates that the slippages and credit costs will remain high in a stress scenario.”
The bank’s deposit base grew around 11 per cent quarter on quarter to Rs 1.17 lakh crore as on June 30, 2020, from Rs 1.05 lakh crore as on March 31, 2020 (Rs. 1.66 lakh crore as on December 31, 2019 and Rs 2.28 lakh crore as on March 31, 2019). These deposits are driven largely by the growth in wholesale deposits and the higher interest rate offerings.
In the recent past, a sizeable portion of the reduction in the deposit base resulted from the outflow of corporate deposits, which declined by around Rs. 22,000 crore in Q3 FY2020 and further by around Rs. 29,300 crore in Q4 FY2020, amid challenges faced by the bank regarding the capital, asset quality and the imposition of a moratorium in March 2020.
The troubled bank was infused with equity capital of Rs 10,000 crore from State Bank of India and other domestic institutions, after the government-approved reconstruction scheme. Besides the reconstruction of the bank, the board was reconstituted with a new Managing Director (MD) and Chief Executive Officer (CEO; former Deputy MD & CFO of SBI). Moreover, two other nominee directors were appointed by SBI and two by the Reserve Bank of India (RBI).