Yes Bank to sell more bad loans to funds, not ARCs

Mumbai: Yes Bank has decided to sell more of its bad loans to funds instead of to asset reconstruction companies (ARC), seeking to reverse its earlier policy on dealing with non-performing assets (NPAs) after regulatory scrutiny.

“Yes Bank has stopped selling bad assets to two ARCs after RBI’s inspection found that the bank was selling the assets at 100 per cent haircut,” said a source close to the development. “The bank has now put non-performing assets on sale and is following e-bidding of these assets.”

An email sent to Yes Bank did not get any response. Yes Bank, which appointed Ravneet Gill as the CEO, is working toward cleaning up the books and making provisions toward bad loans under the new management.

The bank sold one NPA account of Rs 195 crore, with cash recovery of Rs 120 crore in the fourth quarter.

“Immediate concerns lately have been on risk management sys-tems with high growth,” said Pritesh Bumb, analyst, Prabhudas Lilladher. “Some of the action here will be on segregating risk functions and credit approval, reducing portfolio concentration especially in real estate and project finance, deploying conservative accounting norms, especially on fees and provisioning, and enforcing much stricter early warning system for portfolio control.”

Fresh slippages had increased to Rs 3,480 crore mainly due to exposure to IL&FS, the airline industry and real estate. It had identified standard stressed assets of Rs 10,000 crore from corporate groups in real estate, entertainment and infra sectors.



Analysts are worried about Yes Bank’s large exposure to ADAG and Essel group of companies.

RBI had inspected the interconnectedness between Yes Bank and two ARCs after the IL&FS crisis. The bank posted Rs 1,507-crore loss in the fourth quarter due to its exposure to IL&FS.

RBI has nominated former deputy governor R Gandhi to the board of Yes Bank.

“Many investors believe there could be more skeletons in the closet at Yes Bank due to which RBI decided to have an additional director on the board,” said Suresh Ganapathy, research analyst, Macquarie. “In our view, while there are problems in the bank and the balance sheet looks stressed with capital position being weak, the move by RBI could be a precautionary one as Yes Bank is much larger than banks like Dhanlaxmi or LVB, and any failure here could have serious systemic implications.”