Private Lenders Join SBI In Yes Bank Rescue Plan

Private sector lenders Axis Bank Ltd., ICICI Bank Ltd., Kotak Mahindra Bank, Bandhan Bank Ltd. and Federal Bank Ltd., as well as housing finance company Housing Development Finance Corporation Ltd., have approved investments in Yes Bank Ltd., joining State Bank of India in an attempt to resuscitate the lender placed under moratorium last week. Other private investors are also likely to contribute to the rescue.

The board of ICICI Bank Ltd. approved an investment of Rs 1,000 crore in Yes Bank Ltd. ICICI Bank informed the exchanges today that it will purchase 100 crore equity shares of Yes Bank at Rs 10 apiece. “This investment is likely to result in ICICI Bank Limited holding in excess of 5 percent shareholding in Yes Bank Limited, with the final shareholding to be determined based on the final Scheme of Reconstruction and share issuance thereunder,” ICICI Bank said.

Similarly, HDFC will also buy 100 crore equity shares of Yes Bank at a price of Rs 10 per share, investing Rs 1,000 crore in the private bank.

Axis Bank, in its exchange notification, said that it will invest Rs 600 crore. Axis Bank said that its promoter Life Insurance Corporation of India already holds an 8.06 percent stake in Yes Bank but the bank does not directly hold any interest. Kotak Mahindra Bank will be investing Rs 500 crore, while Bandhan Bank will invest Rs 300 crore. Federal Bank has also said it will invest Rs 300 crore.

Investment approvals from the respective boards of ICICI Bank, Axis Bank, and HDFC come a day after SBI approved its investment. Bandhan Bank announced its investment decision on Saturday. The country’s largest lender informed exchanges on Thursday that its board had approved the purchase of 725 crore equity shares of Yes Bank at Rs 10 each, adding up to an investment of Rs 7,250 crore.

Last week, the government placed Yes Bank under a moratorium on the advice of the Reserve Bank of India as the bank’s financial position had weakened considerably. Under the moratorium, the bank’s depositors aren’t allowed to withdraw more than Rs 50,000. The RBI also superseded Yes Bank’s board and appointed former SBI Chief Financial Officer Prashant Kumar as administrator.

The RBI on March 6 had released a draft reconstruction scheme which involved SBI holding up to 49 percent stake in Yes Bank. While addressing reporters on Friday, Finance Minister Nirmala Sitharaman said that SBI will be required to maintain a minimum shareholding of 26 percent in Yes Bank for three years. Others investing in the bank will be required to maintain 75 percent of their shareholding for three years.