(Bloomberg) -- The head of India’s biggest lender said he’s certain “some solutions will emerge” to steady Yes Bank Ltd., which has been on a prolonged quest to raise new capital.
“Yes Bank is a significant player in the market with an almost $40 billion balance sheet,” State Bank of India Chairman Rajnish Kumar told Bloomberg Television in Davos. “I have a feeling that it will not be allowed to fail,” he added.
Kumar’s statement follows speculation that the government, which controls State Bank of India, may ask the lender to play a role in bailiing out the private-sector Yes Bank. However, last month Kumar said it was “out of the question that SBI will do anything for Yes Bank.”
Yes Bank’s dollar bonds due 2023 gained the most in more than a week, according to Bloomberg-compiled prices, and its shares rose 6.5% in Mumbai on Thursday, paring the past year’s drop to 79%. The lender has been plagued by worries about its asset quality and uncertainty about its efforts to raise new capital. It’s trying to shore up a core equity capital ratio that’s barely above a regulatory minimum of 8%.
Read more: Yes Bank Seeks $1.4 Billion After Rejecting Canadian’s Bid
“Further prolonging the capital raise could create panic among credit investors, potentially causing unwanted liquidity pressure for the bank,” Bloomberg Intelligence analyst Diksha Gera wrote in a report.
Kumar said it won’t be good for India’s economy as a whole if Yes Bank were to fail. “Because a bank of that size, if it is allowed to fail, there’s a problem,” he said. “And I am sure that some solutions will emerge.”
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