Yes Bank has adequate liquidity to meet all its obligations, the private lender said on Wednesday, a day after Icra and Care Ratings downgraded the upper tier-II bonds of Yes Bank to default.
“For Basel II, upper tier-II bonds, the specific features of the instrument require debt servicing to be linked to the bank meeting regulatory norms on capital adequacy," Yes Bank said in a regulatory filing.
The bank said that in its FY20 financial results announced on 6 May, it had declared that it did not meet the regulatory capital ratio requirement as on 31 March and, therefore, its inability to service the coupon is solely a function of that.
“The bank would like to stress that the coupon on these bonds is cumulative in nature and any unpaid sum will become payable once the bank meets minimum regulatory capital ratio subject to the required regulatory approvals," the bank said.
The Reserve Bank of India (RBI) has temporarily disallowed it from paying interest on its tier-II bonds due on 29 June because of its weak capital position, the private sector lender said on 20 June.
Following this, Icra and Care Ratings downgraded the bank’s upper tier-II bonds to default.
Icra said that its rating action also takes into account the reported net loss of ₹16,418 crore in FY2020 and the capital-to-risk weighted assets ratio (CRAR) of 8.50%, despite the sizeable capital infusion by new shareholders and the writedown of the additional tier I (AT-I) bonds in Q4 FY20.
On 13 March, the government had approved a rescue plan for Yes Bank backed by the State Bank of India (SBI).
Under the plan, domestic investors including State Bank of India, Housing Development Finance Corp. (HDFC), ICICI Bank, Kotak Mahindra Bank, Bandhan Bank, Federal Bank, and IDFC First Bank invested ₹10,000 crore into Yes Bank.
In the rescue process, Yes Bank’s AT1 bonds worth ₹8,415 crore were written down in full in March.