'CRISIL BBB/Stable' assigned to debt instruments of YES Bank Ltd

CRISIL has assigned its 'CRISIL BBB/Stable' rating to the Tier II bonds (under Basel III) of Rs 13,941 crore and infrastructure bonds of Rs 3,780 crore of Yes Bank Limited (Yes Bank), and has reaffirmed its 'CRISIL A2' rating on certificates of deposit.

The ratings are underpinned by the expectation of continued extraordinary systemic support from key stakeholders and sizeable ownership by State Bank of India (SBI).

CRISIL has taken note of the Yes Bank Ltd Reconstruction Scheme, 2020, (the Scheme) that was notified by the Government of India (GoI) on March 13, 2020. The Scheme followed the imposition of a moratorium on Yes Bank by the central government on March 5, 2020, under Section 45 of the Banking Regulation Act, 1949. Pursuant to the Scheme, key stakeholders, including the Reserve Bank of India (RBI), have undertaken various measures to bolster the bank's liquidity.

The moratorium was lifted on March 18, 2020, and the bank has since been providing full-fledged banking services to customers. The Scheme involved, among other measures, equity infusion of Rs 10,000 crore by 8 entities, mainly banks led by SBI, and the reconstitution of Yes Bank's board with Mr Prashant Kumar (former Deputy Managing Director and Chief Financial Officer of SBI) taking over as Managing Director and Chief Executive Officer.

However, the ability of the bank to limit further deposit outflow, and to build a strong retail liabilities franchise and a stable and sound operating business model with strong compliance and governance framework over the medium term, needs to be demonstrated. Additionally, the bank's asset quality is weak and the impact of the shift in business model to focus on granular retail segments will need to be seen over a longer period. These will be key rating monitorables.

The nationwide lockdown declared by GoI to contain the spread of Covid-19 pandemic has impacted disbursements and collections of financial institutions. The lockdown and restrictions are now being lifted in phases. Any delay in return to normalcy will increase pressure on collections and hence asset quality. The bank has also offered a moratorium to borrowers and its collections are hence expected to be low in the near term. Additionally, any change in payment discipline of borrowers can affect delinquency levels post the moratorium. Given this, gross non-performing assets (NPAs) could rise due to weakening in most sectors. This may increase the credit cost in fiscal 2021, thereby impacting the profitability of the bank, and will be a key monitorable.

Shares of YES BANK LTD. was last trading in BSE at Rs.28.8 as compared to the previous close of Rs. 27.95. The total number of shares traded during the day was 1515457 in over 28574 trades.

The stock hit an intraday high of Rs. 29.2 and intraday low of 28. The net turnover during the day was Rs. 43202103.

Source : Equity Bulls

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