While the ARC will start with purchasing only loans from Yes Bank, it will eventually expand to the broader distressed asset market, the second person quoted above said. In this, Yes Bank’s ARC will compete with the National Asset Reconstruction Company Ltd, the bad bank which is currently being set up with investments from 16 lenders.
In a newspaper advertisement on Wednesday, Yes Bank’s process advisor EY said that it is seeking expressions of interest for the ARC from investors including foreign institutional investors, foreign portfolio investors, private equity and venture capital funds, domestic or foreign investment institutions, asset management companies, non-bank finance companies, ARCs and banks.
As per conditions laid down by EY, the investor must have minimum assets under management and funds deployed globally of $5 billion (approximately Rs 37,500 crore). The investors must also have a demonstrated ability to commit approximately $500 million (approximately Rs 3,750 crore) for investment or deployment.
Apart from financial requirements, the investors must have demonstrated ability in the distressed asset space and must satisfy the RBI’s fit and proper guidelines, the advertisement said.
In March 2020, the RBI had put Yes Bank under moratorium and replaced its board and management. This was after the bank’s balance sheet fell in to deep financial stress due to a build up of large bad loans. The rescue effort for Yes Bank was led by multiple lenders including State Bank of India, ICICI Bank, Housing Development Finance Corporation Ltd and Axis Bank.
However, the reconstructed bank continues to have a large legacy pile of bad loans to deal with.
As of June 30, Yes Bank had outstanding gross non-performing assets worth Rs 28,506 crore. Apart from this, the bank also carried non-performing investments worth Rs 10,315 crore on its balance sheet and had cumulatively written off loans worth Rs 17,065 crore.
A large portion of the bad loans included stressed corporate entities including the Ambani-owned Reliance Group firms, Zee Entertainment Enterprises Ltd., Videocon Industries, some major real estate firms, among others.