ICRA lowers YES Bank’s upper tier-II bonds to D

HYDERABAD: In a setback, ratings firm Icra on Tuesday downgraded Yes Bank’s Rs  1,344 crore worth Basel-II compliant upper tier II bonds ratings to default to D from BB rating.The move comes amid news reports of the Reserve Bank of India agreeing to extend the special liquidity facility for another three months, even though the bank requested an extension of one year.

The facility was announced for three months till June, 16. The downgrade factors in the bank’s debt servicing ability linked to the bank meeting regulatory norms on capitalisation of nine per cent CRAR, the rating agency said. If Yes Bank reports a loss, the coupon or redemption can be paid with the prior approval of the RBI, provided that on such payment, the CRAR remains above 9 per cent, it added.

The bank has adequate liquidity for coupon payment, but as per Basel guidelines, it cannot be paid if CRAR falls below the regulatory requirement. On Tuesday, the central bank dismissed the lender’s permission for the coupon payment in line with regulatory norms.

As a result, the timely servicing of the upcoming coupon, which is cumulative in nature remains constrained and the same is likely to be paid only when the bank achieves a CRAR of nine per cent, Icra noted.

Meanwhile, the bank is in the process of raising capital under the new management and Icra will monitor the second phase of capital raising before upgrading the ratings outlook to positive.

“Moreover, the stabilisation of the deposit base,continued improvement in the customer franchise by improving the share of retail deposits, and the ability to generate capital internally will be key trigger,”
it added.