Money & Banking

ICRA's rating cut stifles Yes Bank's ability to raise fresh capital

Bloomberg Mumbai | Updated on July 31, 2019 Published on July 31, 2019

Yes Bank Ltd’s credit rating has been cut for the second time this year by the local unit of Moody’s Investors Service-ICRA, stifling the lenders ability to boost capital buffers that have shrunk to near the lowest allowed by regulators.

The downgrade comes even as the bank’s share price has fallen 53 per cent this year.

The move has complicated Chief Executive Officer Ravneet Gill’s efforts to raise the planned $1.2 billion through a mix of public and private share sales.

Gill took the helm March 1 after running Deutsche’s India unit for more than six years.

Also read: YES Bank: Higher slippages, slowdown in loan growth weigh on performance

“Raising capital through bonds will be challenging as the lower rating reduces the pool of investors for their debt,” said Ravikant Anand Bhat, senior analyst at Indianivesh Securities Ltd. “Capital is the need of the hour for Yes Bank. Without that they wont be able to grow.”

Yes Bank’s need for funds comes at a time when the nation’s credit market is still grappling with the knock-on effects of a crisis among shadow lenders. The bank itself has a sizable exposure to the cash-strapped industry. Bloomberg Intelligence analyst Diksha Gera expects the lender’s credit costs to stay high in the year to March, due to an increase in stressed assets.

Yes Bank last week in an exchange filing said it is exploring various means of raising capital. A spokesman for the lender declined to comment.

Published on July 31, 2019
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