RBI Extends Rs 50,000-Crore Liquidity Window For Yes Bank By Three Months

The Reserve Bank of India has extended by three months a special liquidity window for Yes Bank Ltd. to help the private lender cover for any shortfall in deposits, according to a person aware of the development.

The bank can access the Rs 50,000-crore liquidity window if outflow of deposits exceeds the accretion of fresh deposits, the person said on condition of anonymity.

Yes Bank was first provided the special liquidity window when it was coming out of a moratorium. The objective was to help the lender tide over a potential exodus of deposits after a Rs 50,000 cap on withdrawals imposed as part of rescue was lifted on March 18. Without the current extension, the window would have closed on June 16.

According to the person quoted earlier, the bank utilised the window in March and April to repay depositors who were seeking to exit the bank.

This was evident from how its deposit base shrank before and after the moratorium was lifted. Between September and December, the private lender’s total deposits fell from Rs 2.09 lakh crore to Rs 1.65 lakh crore. By March 31, it further reduced to Rs 1.05 lakh crore and then to Rs 1.02 lakh crore by May 2.

Prashant Kumar, managing director and chief executive officer at Yes Bank, told BloombergQuint in an interview on May 7 that the deposit outflows had stabilised and the bank had seen corporate as well as retail depositors come back in the April-June period.

According to the person quoted above, Yes Bank was seeing a high rate of customers renewing their existing deposits and retail as well as wholesale customers placing fresh deposits. Still, the special liquidity window will help the bank post a higher liquidity coverage ratio and cover for any urgent liquidity needs, the person said.

Yes Bank and the RBI did not respond to queries mailed on Tuesday. Cogencis first reported the development on Tuesday.

Separately, the bank is looking to raise funds to shore up regulatory capital and meet RBI’s requirements. According to the person quoted earlier, Yes Bank’s management is in talks with potential investors to ascertain the risk appetite in the market, after which they will finalise the amount that can be raised. A decision on this is expected sometime this week.

Yes Bank’s board and its shareholders have already approved fundraising up to Rs 15,000 crore through various instruments. In his interview with BloombergQuint, Kumar said the bank will look to complete the fundraising process by June 30.

This may get delayed by a week, the person quoted above said, adding that it’s likely to take place in more than one tranches.

The bank needs funds urgently as its capital adequacy ratio, as on March 31, was at 8.5% compared with the regulatory minimum of 11.5%. The RBI has already barred the bank from servicing coupon/interest on 10.25% upper tier-II bonds due on June 29, the bank said in a stock exchange notification.

The capital infusion will help Yes Bank diversify its ownership, meet the regulatory requirement and fund its growth.