along with support from the government.
State Bank of India (SBI) Chairman Rajnish Kumar told Bloomberg Television at he World Economic Forum in Davos, “Yes Bank is a significant player in the market with almost $40 billion balance sheet. I have a feeling that it will not be allowed to fail.”
Interestingly, Kumar was quoted last month saying that it is “out of question that SBI will do anything for the bank.” He had opined that Uday Kotak could be the “best candidate” for Yes Bank. “You need deep pockets, and Uday has that,” Kumar had earlier stated. Prior to Kumar’s recent statements on Yes Bank, there had been rounds of speculation that the government could ask the public sector bank to take measures for bailing out the bank from the liquidity crisis.
The Bank has scheduled an Extraordinary General Meeting (EGM) to be held on February 7 in order to raise fresh equity capital of Rs 10,000 crore and to increase the authorised capital to Rs 1,100 crore. The bank needs urgent access to capital and a delay in raising funds could impact the credit investor sentiments, thereby increasing the liquidity troubles for the bank.
The asset quality concerns and uncertainty looming over the bank have pulled down the Yes Bank share prices by over 80%. According to the banks’ Annual Report for FY 18-19, the net NPAs have shot up to 1.86% against previous year’s 0.64%. The capital adequacy ratio stands at 16.5%, down from 18.4% in the previous year. Kumar expressed concerns over the repercussions on the Indian economy as a whole in case Yes Bank fails to survive. As told to Bloomberg, he said, “Because a bank of that size, if it is allowed to fail, there’s a problem.” He further stated that some solutions will emerge for the bank.
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