Yes Bank Discloses Bad Loan Divergence For FY19
Yes Bank Ltd. today informed the exchanges that the Reserve Bank of India found under-reporting of bad loans at the bank in 2018-19. The regulator had previously detected a divergence in the assessment of bad loans in FY16 and FY17 but none in FY18.
In FY19, according to the private lender’s exchange notification, the RBI assessed the level of gross non performing assets at Rs 11,159 crore. The bank had disclosed gross NPAs of Rs 7,882 crore, implying a divergence of Rs 3,277 crore or 41 percent.
The divergence in reporting of net NPAs for the year stood at Rs 2,299 crore or 51 percent of the net NPA amount reported by the bank, the notification said.
As per the RBI’s rules, banks are required to disclose any divergence of more than 15 percent. The market regulator recently specified that this divergence should be disclosed to investors within a day of the receipt of RBI’s report.
The bank said it has already classified accounts worth Rs 1,259 crore as gross NPA in the period after March 2019. It needs to still downgrade loans worth Rs 2,018 crore to the bad loan category, to close the divergence.
The bank has also clarified that of the Rs. 2,018 crore, which is across four accounts, it has already identified loans worth Rs. 1,041 crore (across three accounts) as stressed.
The regulator also noted a divergence of Rs 978 crore in provisioning during the year. Of this, the bank has also made provisions worth Rs 346 crore.
“The bank’s management stands irrevocably committed to ensuring the highest standards of accounting and governance transparency,” Yes Bank said in the notification.
As of the September 2019 ended quarter, Yes Bank had a gross NPA ratio of 7.39 percent and a net NPA ratio of 4.35 percent.
The bank, in its statement to stock exchanges, also said it intends to convene a meeting of its board of directors by November to finalise the capital raising plan. Last month, the bank had informed the bourses that it had received a binding investment offer worth $1.2 billion from a North American investor, without disclosing the name of the investor. The deal is awaiting regulatory clearance.
Yes Bank has faced pressures since the RBI’s asset quality review in October 2015.
The RBI had first noted a divergence in the bank’s asset quality disclosures in the financial year ended March 2016, where the bank was forced to add Rs 4,176 crore worth bad loans. In the following financial year, the gross NPA divergence widened to Rs 6,355 crore.
For financial year March 2018, the bank disclosed that the RBI found no asset quality divergence, which led to the regulator rebuking the bank for incomplete disclosure to the stock exchanges, as it had found other issues.
The bank, at the time, was also in the process of a leadership transition, as founder Rana Kapoor had just stepped down as its chief executive officer on Jan. 31, while Ravneet Gill was set to begin his term in March 2019. Kapoor’s exit came after the RBI declined to give him another term.