Why does Yes Bank plan to transfer all its stressed assets into a dedicated ARC?

Yes Bank had recently proposed to set an asset reconstruction company (ARC) and transfer its entire pool of stressed assets to the ARC. The idea was to reduce the level of stress in its balance sheet and will reduce providing provision cover on incremental slippages. They need to keep the net bad loans below 6%. Meanwhile, Yes Bank has also taken approval to raise another Rs.10,000 crore which will be useful in asset quality stress challenges.

According to Yes Bank, they had received EOIs from a number of investors to take a stake in the ARC. Some of the interested investors reportedly include Brookfield Asset Management, Oaktree Capital, JC Flower, Varde Partners, Avenue Asia, Bain Capital, Apollo Global Management etc. Most of the rating agencies continue to be uncomfortable with the quantum of corporate deposits and want Yes Bank to increase its CASA share.

As of now, SBI holds 30% in Yes Bank with an undertaking that it would not allow the ownership to go below 26%.