India’s central bank says that Yes Bank is no longer lying about its bad loans


  • The central bank signed off on Yes Bank’s financial statements for the year ended March 2018 in its latest risk review.
  • The clean chit from the RBI will reassure investors as the bank attempts a phase of recovery under new CEO Ravneet Gill.
  • Yes Bank's shares surged nearly 30% in the first session of trading today.
Late last evening, Yes Bank, one of India’s largest private sector lenders, declared that the Reserve Bank of India had cleared it of under-reporting bad loans.

The central bank signed off on Yes Bank’s financial statements for the year ended March 2018 in its latest risk review, indicating the lender’s compliance with reporting and asset provisioning norms. As a result, Yes Bank's share price soared by nearly 30% in the first session of trading today amid a renewed sense of confidence in the lender.

The news is welcome for Yes Bank.

The lender had a rather tumultuous 2018, losing more than half its market share in less than 1.5 months between August and September as a result of two things - the RBI’s discovery that it had under-reported tens of billions of non-performing loans and its subsequent refusal to grant CEO Rana Kapoor an extension to his term.

In 2015-16, the RBI found a net divergence of ₹42 billion in its assessment of Yes Bank’s bad loans, which subsequently ballooned to ₹64 billion the following year.

While it might be too late to reinstate Rana Kapoor, the clean chit from the RBI will reassure investors as the bank attempts a phase of recovery under new CEO Ravneet Gill. It will pave the way for the bank to raise capital from the market and prevent a downgrade from ratings agencies.

For the quarter ended December 2018, Yes Bank posted a 7% decline in net profit to ₹10 billion while net provisions stood at ₹50.8 billion - more than 90% of which were taken for exposure to IL&FS or a “stressed infrastructure conglomerate” . More importantly, the growth in its gross non-performing assets was curtailed, as the bad loan ratio rose to 2.1% from 1.72% in the year-ago quarter.



SEE ALSO:

One of India’s largest private banks has lost more than half its market value in 37 days

Yes Bank's 15-month journey from regulatory crackdown to finding a new CEO

Yes Bank’s problems get further compounded as its chairman is forced to resign amid a corruption probe

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