Rating agencies downgrade YES Bank’s instruments
A day after the Reserve Bank of India put a moratorium on it and capped withdrawals, YES Bank sought to calm depositors and promised that it is available to address all queries.
Prashant Kumar the RBI-appointed administrator of the bank, also said the current moratorium has been brought into effect keeping the depositors’ interest in mind and towards restoring their confidence. “A solution is being worked upon to revive the bank well before the moratorium period of 30 days. The bank is also taking the necessary steps to ensure seamless transactions for customers. We assure the depositors that their money is safe and that there is absolutely no reason to panic,” he said on Friday.
But rating agencies began downgrading the lender. Moody’s Investors Service downgraded YES Bank’s long-term foreign currency issuer rating to Caa3 from B2.
“The downgrade... is a result of an event of default triggered by the RBI’s 30-day moratorium, which prevents YES Bank from making a full and timely payment to its senior creditors.” ICRA also downgraded YES Bank’s ₹52,611-crore bonds and said it factors in the moratorium placed on the bank by the government. “...the bank had not paid the coupon on the Basel II Tier I bond due on March 5, which was subject to the bank meeting the regulatory CAR,” it further noted.
Fitch Ratings, which does not rate YES Bank, said the actions of the RBI and the government highlight systemic risks.
“The RBI’s takeover of YES Bank appears intended to restore depositor confidence. However, we believe there is a risk that the RBI’s move could backfire if it prompts depositors to shift their money to institutions that are perceived to be safer, it said, adding that this could pose liquidity challenges, particularly for smaller private banks with weaker franchises.
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Published on
March 06, 2020
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