The agency also maintained ‘Rating Watch Negative (RWN)’ on long-term bonds of YES Bank. RWN indicates that the rating will be either affirmed or downgraded.
Ind-Ra said it continues to await developments on equity raising, which in the rating agency’s opinion is critical for providing sufficient cushion to the possible credit cost impact from the stressed asset pool on regulatory capital requirements in the short- and medium-term.
The key rating drivers included delays in fundraising and rapid credit migration over the last few quarters in some of the bank’s corporate exposure spread over multiple sectors.
YES Bank had initially planned to raise capital in the current fiscal, but its board has rejected the binding term sheets of $1.2 billion offered by Canadian investor SPGP Group/Erwin Singh Braich. Also, the decision to consider the binding term sheet of $500 million by Citax Investment Group is yet to be finalised by the board.
Ind-Ra also sees liquidity level under threat in case there is no swift fundraising. “Although the liquidity position of the bank seemed adequate at end-September 2019 (liquidity coverage ratio of 114 per cent), Ind-Ra believes that in the absence of any swift capital raise, the bank’s ability to manage its asset and liability…