The beleaguered additional tier-I bond holders of Yes Bank are expecting the RBI to go soft on its proposal to completely write off their huge exposures in the bank, by converting a part of their holdings into equity. The bond holders have already moved the Bombay high court against the Reserve Bank of India.
It is learnt that negotiations have started between the RBI and the bond holders amid optimism the banking regulator could make some changes in its reconstruction scheme for the bank in a day or two.
On March 5, the RBI had announced the reconstruction scheme for the troubled bank and said that instruments qualifying as additional tier-1 (AT-1) capital, issued by the lender under the Basel III framework, will be written down permanently, in full. According to credit rating agency Icra, entities such as mutual funds, insurance companies and pension funds have invested as much as Rs 10,800 crore in the bonds.
Consequently, Axis Trustee Services Ltd, representing the bond holders, had filed a petition in the Bombay high court against the Union of India, the RBI and Yes Bank against the writedown of its investments.
Amid the talks between the bond holders and the RBI, it is understood that the matter could not come up for hearing in the court on Monday.
While the officials from Axis Trustee Services could not be reached for comments, the bond holders have proposed a part of their holdings be converted into Yes Bank shares and the rest be written off.
Mutual fund industry body Amfi on Monday said equity investors should be the first to take the hit in case of Yes Bank’s restructuring, followed by the preference shareholders, and that the AT1 bondholders should be the last.
Icra has warned the write-down could severely affect the market for AT1 bonds. The rating agency said a sum of Rs 93,699 crore was outstanding in AT1 bonds, with private banks issuing Rs 39,315 crore.
Meanwhile, the Institute of Chartered Accountants of India (ICAI) has said it will review the financial statements of Yes Bank for 2017-18 and 2018-19. “In case FRRB finds any material/serious non-compliance, it would refer the case to the director (discipline) of ICAI for initiating action against the auditor,” the ICAI said.
Anil group defence
The Anil Ambani-led Reliance Group, which was mentioned by finance minister Nirmala Sitharaman as one of the top lenders from the bank, said its entire debt was fully secured and was availed by them in the ordinary course of business.
In a statement, the group said it was committed to honouring the repayments of all its borrowings from the bank through its asset monetisation programme. The group, it added, has “nil direct or indirect exposure to Rana Kapoor, the former CEO of Yes Bank, or his wife or daughters, or any entities controlled by Rana Kapoor or his family”. It did not disclose the loans taken from the bank.
“Reliance Group is committed to honouring repayments of all its borrowings from Yes Bank Ltd through its various asset monetisation programmes which are all at advanced stages,” the statement said.
A special court on Wednesday extended till March 16 the Enforcement Directorate (ED) custody of Yes Bank founder Rana Kapoor, arrested on money laundering charges.
Rajan views
Former RBI governor Raghuram Rajan on Wednesday said there was a lot of time to put together a plan for Yes Bank which had given “enough” notice about the problems it was facing.
“Yes Bank had given us enough notice that it has been in difficulty... so there was enough time to put together a plan. “I hope what we have got is the best available (plan), but I don’t want to second guess, because I don’t know the details,” Rajan said in an interview to a news channel.
Rajan asserted that he has been saying for a long time now that there is a need to clean up the financial sector quickly and in a resolute way so that the country can move forward.
