As the Union Cabinet on Friday approved the RBI's reconstruction scheme for Yes Bank, major private banks have come out with investment commitments into the crisis-hit bank.
Four top Indian private banks, HDFC, ICICI, Kotak Mahindra and Axis Bank have announced investments which cumulatively account to Rs 3,100 crore. ICICI Bank was the first private lender to have confirmed its participation in the SBI-led restructuring plan for Yes Bank.
Both ICICI and HDFC Bank would invest Rs 1,000 crore each. Axis Bank and the Uday Kotak-led Kotak Mahindra Bank would put in Rs 600 crore and Rs 500 crore, respectively. State Bank of India's board has already approved 49 per cent stake purchase in Yes Bank, as per the RBI's reconstruction scheme for the bank. It had said on Thursday that an investment of Rs 7,250 crore would be made in Yes Bank to pick up 725 crore equity shares.
Both ICICI and HDFC Bank are likely to have five per cent shareholding each in the restructured Yes Bank. In its regulatory filing, HDFC Bank informed that its investment of Rs 1,000 crore would be completed by March 31.
"This investment is likely to result in ICICI Bank Limited holding in excess of 5.0 per cent shareholding in Yes Bank Limited, with the final shareholding to be determined based on the final scheme of reconstruction and share issuance thereunder," ICICI Bank said in its regulatory filing.
The banks will acquire equity shares of Rs 2 each of Yes Bank Limited, at a premium of Rs 8 per equity share, which means they would buy shares at Rs 10 each under the proposed Scheme of Reconstruction of Yes Bank Limited under the Banking Regulation Act, 1949.
On Friday, the Union Cabinet approved the Reserve Bank-proposed reconstruction plan for Yes Bank, under which the State Bank along with other private investors would pump in equity. The details of the scheme are expected to come once the government notifies the scheme.
According to Finance Minister Nirmala Sitharaman, the Cabinet decided that the SBI will hold at least 26 per cent stake in the private bank for a minimum period of three years. Similarly, the other investors, including the private banks will also be mandated to have a similar lock-in period for 75 per cent of their investment in the bank.
The authorised share capital of the Yes Bank will be revised upwards from Rs 1,100 crore to Rs 6,200 crore. Speaking to the media after the Cabinet meeting, Sitharaman also said that other investors are also being invited to invest in the cash-strapped Yes Bank.
Sources said that Radhakishan Damani, Rakesh Jhunjhunwala, Azim Premji Trust may also pick up some equity in Yes bank. However, this could not be independently verified. As per experts, Yes Bank would require over Rs 20,000 crore to avoid a collapse. So far the committed investment amount stands at over Rs 10,000 crore, which is just half of the initial assessment.
Sources said that the government and SBI are trying to get in more investors including overseas funds. It is felt that presence of SBI and other private banks will encourage other investors to put their money in Yes Bank.
Life Insurance Corp, which has over 8 per cent stake in the bank is also being looked at for participation but SBI chairman Rajnish Kumar has reportedly said that they have not approached the insurer. Sitharaman on Friday indicated that the details of the scheme will be notified soon.
She further said that Yes Bank's moratorium will be lifted at 1600 hours, after three working days of the scheme being notified. The office of the administrator shall also stand vacated after seven days from the cessation of moratorium and the new Board will take over the bank.
Last week, the RBI placed Yes Bank under moratorium and capped the withdrawal limit at Rs 50,000 till April 3, due to deteriorating financial health of the bank. The central bank also superseded Yes Bank's board of directors and appointed former SBI CFO Prashant Kumar as its administrator.