RBI may have a solution for Yes Bank's billion-dollar problem

The government and the Reserve Bank of India (RBI) are mulling a backup rescue plan in the event that a suggested $2 billion capital infusion into the Yes Bank Ltd gets further deferred.

The options that are being considered comprise an interim bailout of the embattled private lender which includes selling pooled assets to public sector banks (PSBs) or, in case that doesn't work then as a last recourse, selling a small stake to a state-run bank to set the stage for further capital raising, sources told the Livemint.

Yes Bank which is reeling under the burden of bad loans, has necessitated a consideration of all options by the government and the RBI as the downfall of a bank can have a ripple effect on inter-connected financial institutions and undermine economic growth.

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Although the bank is optimistic that it will manage to raise funds by as early as March 14, it is likely that a large PSB may be asked to intervene temporarily if the talks with investors overshoot set time frame, the news daily reported. The negotiations with the investors are still underway and no final offer has been made yet.

Should that happen, it will highly likely make a case for the purchase of pooled assets from Yes Bank, the report added.

Three investors, Cerberus Capital Management, Hinduja Group and JC Flowers are examining the books of Yes Bank for a potential investment. But, in view of the time constraints and the sheer size of the capital infusion, the investors are likely to request for more time.

Also Read: YES Bank gets shareholders' approval to raise up to Rs 10,000 crore

"The deadline of 14 March seems overly optimistic at the moment even though the potential investors remain engaged," a source told the news daily.

"However, it is possible that Yes Bank could close a smaller round by 14 March while continuing its conversations with investors," the source further stated.

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