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Yes Bank: RBI night lamp can provide stability, but fundraising is a challenge



Mumbai: Only recently did Ja Bank Ltd in trouble get a new head to throw sunlight into his books. But it seems a night vigil was also needed to pulse the lender. Yes, Bank is, after all, a systemically important bank and has a huge pile of deposits that it must protect.

Enter R. Gandhi, former deputy governor of the Reserve Bank of India (RBI), as an additional director of the bank.

It is rare for the bank supervisor to make a special management appointment. In the past few cases of such appointments, the banks in question were small.

To make matters worse, RBI is cryptic about the reasons for such an agreement. However, the banking law clearly states that the regulator has the right to appoint additional directors whenever it deems this necessary in the public interest or in the interest of the bank or its depositors.

Gandhi & # 39; s entry has returned questions about lending practices to the bank. What's more, it has cast a spanner in the works of Yes Bank for raising capital.

"There are concerns among investors that all troubled assets at the bank have not been uncovered. Until investors are sure about the bank's processes, I think it will be difficult to get a good answer in their capital-raising plans," said Suresh Ganapathy, Head of Financial Investigation at Macquarie Capital Securities Ltd.

Mumbai: Only recently did Ja Bank Ltd in trouble get a new head to throw sunlight into his books. But it seems a night vigil was also needed to pulse the lender. Yes, Bank is, after all, a systemically important bank and has a huge pile of deposits that it must protect.

Enter R. Gandhi, former deputy governor of the Reserve Bank of India (RBI), as an additional director of the bank.

It is rare for the bank supervisor to make a special management appointment. In the past few cases of such appointments, the banks in question were small.

To make matters worse, RBI is cryptic about the reasons for such an agreement. However, the banking law clearly states that the regulator has the right to appoint additional directors whenever it deems this necessary in the public interest or in the interest of the bank or its depositors.

Gandhi & # 39; s entry has returned questions about lending practices to the bank. What's more, it has cast a spanner in the works of Yes Bank for raising capital.

"There are concerns among investors that all troubled assets at the bank have not been uncovered. Until investors are sure about the bank's processes, I think it will be difficult to get a good answer in their capital-raising plans," said Suresh Ganapathy, Head of Financial Investigation at Macquarie Capital Securities Ltd.

The success of the capital increase was questioned earlier. After all, with a Common Equity Tier-1 ratio of 8.64% from March and looming provisions, it was clear that the lender was desperate to raise money. Despair usually causes poor negotiating power with investors.

The bank has pathetic insurance in the form of provisions against bad assets, since the coverage ratio is 43%. News reports suggest that Yes Bank has significant exposure to stressed companies of the Reliance Anil Dhirubhai Ambani Group.

New head of Ravneet Gill had worked out a detail 10,000 crore watchlists, but as Ganapathy of Macquarie Capital notes, investors are now worried that the crap in Yes Bank has not yet been fully revealed. Collecting money from capital markets becomes a challenge and the bank needs capital to grow. The fall in stocks of no less than 8.2% on Wednesday is not a good sign.

That said, investors can take some comfort from the fact that Gill is already assured that the lender would comply with the regulator's rules on all aspects. Following Gill's revelations, earnings expectations have been lowered, valuation has been tightened and analysts have downgraded the shares. Until the air on Yes Bank's lending practices dries up, it is unlikely that the shares will see breakthroughs.


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