SBI Chief: Willing to invest up to Rs 10,000 crore to ‘reconstruct’ Yes Bank
MUMBAI: State Bank of India chairman Rajnish Kumar said on Saturday that he sees Rs 10,000 crore as the outer limit for the bank’s investment in the troubled Yes Bank.
Side-stepping a direct response on whether LIC would be investing alongside SBI, Kumar said, “Many investors – domestic and international – have shown interest in the reconstruction of Yes Bank … There are 2-3 good names.”
While acknowledging, at a media interaction, that the Rs 50,000 limit on cash withdrawals “will be an inconvenience for a few days”, Kumar assured Yes Bank depositors their money was not at risk.
Asked about how much SBI is willing to commit to reconstruct Yes Bank, Kumar said that if the bank goes solo and picks up the entire 49% it’s allowed to by the RBI under the draft scheme, its immediate investment, on the basis of the current capital base, would be Rs 2,450 crore; If Yes Bank needs Rs 20,000 crore and the authorized capital is accordingly raised, then SBI’s investment would have been around Rs 10,000 crore. “Our minimum commitment is for 26%, with a three-year lock-in, which will be around Rs 5,200 crore,” Kumar said. “Anything above that, up to 49%, will depend on the interest of other investors and the capital requirement of the bank.”
The SBI chairman defended the decision to rescue a private sector bank saying that there was a risk of contagion if it failed. He pointed out that even in “temples of capitalism”, governments had to come out with rescue packages in the form of a $ 2-trillion troubled asset purchase in the US and £ 50-billion bank recapitalisation in the UK.
Asked if Yes Bank’s troubles had damaged damaged brand, Kumar said, “We must clearly distinguish… Yes Bank is an entity, Rana Kapoor is an individual. If an individual has done something wrong, he will pay the price for that. Why should the enterprise suffer? ”
As to whether its investment in Yes Bank might adversely impact SBI’s finances, he said, “We have done our maths. There will be a very marginal impact on our capital adequacy. We have a policy of ensuring our capital adequacy ratio at half a percentage about the statutory requirement. This will not change, ”said Kumar.
On the possibility of a conflict of interest between the two banks, Kumar said, “Once a new board and CEO is in place in Yes Bank, SBI would maintain an arm’s-length relationship and convey its expectations through the new board.”
