The board of State bank of India has given in-principle nod for exploring investment in the capital starved Yes bank.
In a late night notification, the country’s largest bank said that the central board discussed the bank’s plans to acquire stake in the private sector lender and has given an in-principal approval to explore investment opportunity in the bank.
On Thursday Bloomberg had reported that the government may ask SBI to pick up stake in Yes bank. The news agency also reported that the state owned bank will choose other members of the consortium. Mint also reported that the consortium could look at bringing in ₹12,000-14,000 crore in the bank.
Yes Bank has been struggling to find investors to execute its plan to raise funds worth $2 billion despite several efforts. The bank has been in trouble since its founder and former chief execute officer (CEO) Rana Kapoor was not given an extension by the Reserve Bank of India in 2018 owing to corporate governance issues and under-reporting of bad loans. Kapoor’s term as the bank’s CEO had ended on January 2019.
Mint was the first to report that the government and RBI were considering all options, including an interim bailout of Yes Bank, in case the proposed fundraising was to get more delayed.
The government and RBI are of the view that Yes Bank's collapse can have a domino effect on interlinked financial institutions and impair growth for the banking sector.
In January, even SBI's chairman Rajnish Kumar had said Yes Bank "will not be allowed to fail" and that “some solutions will emerge" to steady the private lender. This indicated that something was in the works.
Yes Bank's share value has eroded more than 80% in the past one year due to concerns overt its asset quality and uncertainty around its efforts to raise capital for growth purpose