India Ratings and Research on Thursday downgraded the long term and short term ratings of Yes Bank and placed it on the Rating Watch Negative as the troubled lender failed to meet its expectations for equity infusion.

“India Ratings and Research has downgraded Yes Bank’s Long-Term Issuer Rating to ‘IND A’ from ‘IND A+’ and its Short-Term Issuer Rating to ‘IND A1’ from ‘IND A1+’. The agency has simultaneously placed the ratings on Rating Watch Negative (RWN). The Outlook on the earlier rating was Negative,”it said in a statement.

Read more: Yes Bank to favourably consider Citax’s $500 million investment offer

The rating agency said the downgrade reflects the inadequate progress in the quantum and pace of equity infusions, which is critical for providing sufficient cushion for the credit cost impact of the stressed asset pool.

“Although the liquidity position of the bank seemed adequate at end-September 2019, Ind-Ra believes that, in the absence of improvements on the capital side, the ability of the bank to manage its asset and liability maturities might be tested further,” it further said.

The agency further said that Yes Bank’s CET1 adjusted for provision divergence was about 8.5 per cent as on September 30, 2019 against the published figure of 8.7 per cent. The CET1 was lower than the average 12 per cent of most private sector banks.

The low CET1 is also accompanied by lower provisions on large corporate exposures and stressed book that is almost 1.5 times the gross non performing assets of Yes Bank, the agency said.

“Furthermore, the bank’s exposure concentration (top 20 exposures to the total equity) increased to 2.5 times in 2018-19 (lower denominator effect) from 2.16 times in 2017-18,” India Ratings further said.

Yes Bank scrip however gained 6.74 per cent and closed at Rs 49.90 apiece on BSE on Thursday.

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