The Reserve Bank of India (RBI) has barred Yes Bank from paying interest on its tier-II bonds as its capital levels were below the regulatory requirements.

In a filing to the stock exchanges, the private sector lender said it had approached the banking sector regulator in May for payment of interest (coupon) for the bonds which is due in June 29. It said that the RBI had expressed its inability to accede to the request as the bank did not meet the minimum capital requirements at present.

Yes Bank added that the unpaid interest amount will be accumulated and paid to investors later, subject to it complying with the capital requirements.

For the year ended March 31, 2020, Yes Bank had a capital adequacy ratio of 8.5 per cent and the common equity tier-1 ratio stood at 6.3 per cent.

According to RBI norms, banks should have a minimum capital adequacy ratio of 9 per cent.

The development comes at a time Yes Bank is planning to raise at least Rs 10,000 crore through a follow-on offer or rights issue. The offering is expected to raise its capital adequacy ratio to 10 per cent.

“Our target is to maintain CET1 of at least 10 per cent. We already got the approval to this capital to the extent of Rs 15,000 crore. We have already appointed six merchant bankers to take it forward and we will decide the mode in which we are going to raise capital. It could be a QIP, a rights issue, an FPO or a combination of those things,” Prashant Kumar, MD & CEO of Yes Bank, had told analysts in a concall after the announcement of its fourth-quarter results.

Kumar had then said that the bank is working on three options that included a qualified institutional placement (QIP), an FPO and a rights issue.

He had added that the QIP route seemed more likely as it “happens very fast. The only thing is as per Sebi formula we cannot give more than five per cent discount on the last two weeks average. So, if we find investors who are willing to put money at this rate, we would be more than willing to do it very fast”.

But that situation seems difficult. So, we have applied for fast tracking both the rights issue as well as the FPO. Whether we go for the rights issue or the FPO route, depending on the advice and investor interest, we will decide on the price,” he added.