Money & Banking

`Yes Bank has adequate liquidity to meet all obligations’

Surabhi Mumbai | Updated on June 22, 2020

Prashant Kumar

Interest on Upper Tier II bonds will be paid when the bank meets the minimum regulatory capital ratio.

Private sector lender Yes Bank on Monday assuaged concerns over its liquidity position.

“The bank has adequate liquidity to meet all its obligations," said Prashant Kumar, Managing Director and CEO Yes Bank.

The comments come in the backdrop of the Reserve Bank of India barring the lender from paying interest (coupon) on the Tier II bonds as its capital adequacy ratio was below regulatory requirements.

“I would like to stress that the coupon on these bonds (Basel II, Upper Tier II Bonds) is cumulative in nature and any unpaid sum will become payable once the bank meets minimum regulatory capital ratio,” Kumar said.

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, he further said, adding that the bank in its fourth-quarter results had declared that it did not meet the regulatory capital ratio requirement as on March 31, 2020.

“Therefore, its inability to service the coupon due on June 29, 2020, is solely a function of the Bank being below the regulatory capital threshold as on March 31, 2020,” he stated.

The bank had a capital adequacy ratio of 8.5 per cent as on March 31, 2020 as is expected to raise as much as ₹10,000 crore of capital soon.

Yes Bank had earlier approached RBI to allow it to pay interest on the bonds. These Unsecured Non-Convertible Upper Tier II Bonds have a coupon of 10.25 per cent.

In a regulatory filing in May, the bank had said that as the capital to risk assets ratio is below regulatory requirement, it has filed an application with Reserve Bank of India seeking approval for payment of interest due as on June 29, 2020, for the captioned Upper Tier II Bonds.

“In continuation, we would like to inform that Reserve Bank of India has expressed its inability to accede to Bank’s request for payment of Interest due as on June 29, 2020, since the bank does not meet the minimum capital requirements currently,” it then said on June 20.

Published on June 22, 2020

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