Yes Bank will not be allowed to fail: Kumar
MUMBAI/SINGAPORE: The head of India’s biggest lender said he’s certain “some solutions will emerge” to steady Yes Bank Ltd, which has been on a prolonged quest to raise new capital.
“Yes Bank is a significant player in the market with an almost $40 billion balance sheet,” State Bank of India (SBI) chairman Rajnish Kumar told Bloomberg Television in Davos. “I have a feeling that it will not be allowed to fail,” he added.
Kumar’s statement follows speculation that the government, which controls State Bank of India, may ask the lender to play a role in bailing out the privatesector Yes Bank.
However, last month Kumar said it was “out of the question that SBI will do anything for Yes Bank.”
Yes Bank’s shares rose as much as 8% in Mumbai on Thursday, paring the past year’s drop to 79%.
The lender has been plagued by worries about its asset quality and uncertainty about its efforts to raise new capital. It’s trying to shore up a core equity capital ratio that’s barely above a regulatory minimum of 8%.
“Further prolonging the capital raise could create panic among credit investors, potentially causing unwanted liquidity pressure for the bank,” Bloomberg Intelligence analyst Diksha Gera wrote in a report.
Kumar said it won’t be good for India’s economy as a whole if Yes Bank were to fail. “Because a bank of that size, if it is allowed to fail, there’s a problem,” he said. “And I am sure that some solutions will emerge.”
Meanwhile, when asked about the credit crunch in the Indian economy, Kumar said he believes the credit market will be back to stability and normalcy soon. “There has been a series of steps... bank recapitalisation has happened, PSU (public sector undertaking) banks, which control about 60% of the assets in the country are returning to profits...”, he said.