Indusind defers fund raising due to "market conditions" post Yes Bank revamp
T
he crisis at Yes Bank is affecting sentiment in the banking sector and fund raising as Indusind Bank has deferred its board meeting scheduled for Monday to consider raising funds.
"In view of the current market conditions and since the bank is adequately capitalised at present, it has been decided not to consider raising of Base-III compliant debt capital instruments for the time being. The board meeting scheduled for March 9,2020 is therefore being deferred," Indusind Bank said in a regulatory filing.
A meeting of the Board of Directors of the bank was proposed to be held on Monday to consider and approve, the borrowing and raising of funds in Indian and/or foreign currency by issuance of debt securities in the nature of additional Tier I capital (AT1) and/or Tier 2 Capital of the bank, Indusind Bank said.
The Yes Bank scare and the writedown of its AT1 capital seems to have spooked Indusind Bank.
As per the scheme for reconstruction of Yes Bank, no change has been made in the rights and liabilities of the reconstructed bank but its Additional Tier 1 capital of Rs 8,700 crore has been written down completely and permanently. This in turn has led to huge losses for bond holders including mutual funds.
Analysts had flagged the issue that after the Yes Bank writedown it would become difficult for private and public sector banks to raise capital through this route.
Acuite Ratings said that the permanent and full write-down of AT1 bonds of Yes Bank as envisaged in the reconstruction scheme will substantially add to the risk perception on these hybrid instruments and limit their issuances only by large public and private sector banks.
"In our estimates, investors i.e. mostly domestic mutual funds and banks would lose both principal and interest payable on AT1 bonds amounting to Rs 10,800 Cr of Yes Bank".
✔️ Indusind defers fund raising due to "market conditions" post Yes Bank revamp
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