Shriram Transport Finance Co Ltd is unlikely to suffer any credit losses through its exposure to YES Bank's bonds, S&P Global Ratings said in a note.
However, other financial institutions with exposure to 'YES Bank&'s hybrid securities may face credit losses, it added.
"The commentary comes after Shriram Transport Finance today clarified that it does not have any exposure to the YES Bank's additional tier-I bonds, and only has Rs 500 million exposure to YES Bank in form of upper tier-I bonds."
Even if STFC (Shriram Transport Finance Co) is required to make provision for 100% credit loss on this exposure, it will not materially affect its capitalisation given the exposure is currently less than 0.5% of STFC's net worth. But we believe other finance companies holding Yes Bank’s hybrid securities in their treasury investments could see credit losses,” S&P Global said.
On Friday, the Reserve Bank of India's proposed to rescue YES Bank through capital infusion from State Bank of India. The restructuring includes 'permanent' write-down of additional tier-I bonds of YES Bank.
The rating agency said that it sees potential risk of deterioration in Shriram Transport Finance's asset quality 'over the next few quarters due to slower economic growth, weaker economy and lower vehicle utilisation.