By Jeanette Rodrigues and Haslinda Amin
“Yes Bank is a significant player in the market with an almost $40 billion balance sheet,” State Bank of IndiaNSE 2.23 % Chairman Rajnish Kumar told Bloomberg Television in Davos. “I have a feeling that it will not be allowed to fail,” he added.
Kumar’s statement follows speculation that the government, which controls State Bank of India, may ask the lender to play a role in bailiing out the private-sector Yes Bank. However, last month Kumar said it was “out of the question that SBI will do anything for Yes Bank.”
Yes Bank’s shares have plunged more than 80 per cent over the past year amid worries about its asset quality and uncertainty about its efforts to raise new capital. It’s trying to shore up a core equity capital ratio that’s barely above a regulatory minimum of 8 per cent.
“Further prolonging the capital raise could create panic among credit investors, potentially causing unwanted liquidity pressure for the bank,” Bloomberg Intelligence analyst Diksha Gera wrote in a report.
Kumar said it won’t be good for India’s economy as a whole if Yes Bank were to fail. “Because a bank of that size, if it is allowed to fail, there’s a problem,” he said. “And I am sure that some solutions will emerge.”