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With its improved capital position post the ₹15,000-crore follow-on public offer, private sector lender YES Bank has said that it will pay the interest on Basel II Upper Tier II bonds.
“Interest amounting to ₹6.15 crore on Basel II Upper Tier II bonds was not paid by the bank on June 29, 2020, as the capital adequacy ratio of the bank was lower than the minimum required. Interest on this instrument is cumulative in nature,” the lender said in the notes in its first quarter results.
“With the Proforma total Capital Adequacy Ratio at 20 per cent, the bank shall make the payment of the apportioned interest amount after obtaining regulatory approvals,” it further said.
With a capital adequacy ratio of 8.5 per cent as on March 31, 2020, the troubled private sector lender had not been given permission by the Reserve Bank of India to pay the interest due on these bonds.
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“…we would like to inform that the Reserve Bank of India has expressed its inability to accede to the 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.
At the time, YES Bank’s Managing Director and CEO Prashant Kumar had said the lender had adequate liquidity to meet all its obligations.
“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,” he had said.
Following that, rating agency ICRA had downgraded the Basel II Compliant Upper Tier II bonds of YES Bank to D.
Post the capital raise, YES Bank is also compliant with its minimum regulatory LCR requirements of 114 per cent as at June 30, 2020 (regulatory minimum requirement of 80 per cent).
In the notes, the bank also noted that while there is systemic risk due to the Covid-19 pandemic which may adversely impact the financial sector, but given the capital raise and its “fast stabilising liquidity position in the first quarter” along with compliance with regulatory ratios, customer base and branch network and first quarter performance, it believes that the earlier highlighted material uncertainties regarding going concern have been substantially addressed.
As such, the financial results continue to be prepared on a going concern basis, it said.
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