Investors in such instruments typically include mutual fund companies and bank treasures, experts said.
“The instruments eligible as additional category 1 capital, issued by Yes Bank within the framework of Basel III, must be permanently depreciated, in their entirety, with effect on the date fixed”, the draft of “Yes Bank Ltd. Reconstruction Scheme, “2020,” said.
The project, which is open to public comment, added that it complies with RBI regulations based on the Basel framework.
“It is for the first time in the history of the Indian banking sector that the T1 bonds of a bank are depreciated at the” point of non-viability “(PONV), that is to say that investors must touch both the principal and the balance of the interest payments, “said Acuite Ratings president Suman Chowdhury.
Acuite and its larger counterpart Icra Ratings have declared that the value of the debt which will be entirely written off will amount to 10,800 crore rupees.
Following the rating agencies’ announcement and downgrade of Yes Bank ratings, Baroda Mutual Fund separated the portfolios into two regimes – Baroda Treasury Advantage Fund and Baroda Credit Risk Fund – and reduced the value of investments to zero.
As part of the restructuring, SBI is ready to invest up to Rs 2,450 crore to take a 49 percent stake in the besieged lender and to ensure that its stake does not drop below 26 percent for the first three years after entering.
The RBI project also proposes a host of other requirements that may be considered detrimental by current bank promoters, and also confers greater powers in the appointment of management.
He proposes the deletion of four statutes from the transaction date, which will include the right of Indian partners to appoint three independent representative directors, to recommend the names of the president and chief executive officer and to appoint full-time directors.
The newly appointed board of directors of the reconstructed bank will, however, have the freedom to suspend the services of key executives at any time after following the prescribed procedure, he said.
