CARE upgrades Yes Bank’s debt instruments rating

CARE Ratings have revised its rating on private lender Yes Bank‘s debt instrument on Tuesday. The bank’s stock will remain in focus following the rating action.

CARE has revised Yes Bank’s infrastructure bonds rating to ‘CARE BBB’ from previous ‘CARE B’. A similar rating was assigned on Lower Tier II Bonds and Tier II Bonds (Basel III).

Also, CARE revised its outlook to ‘Stable’ on Yes Bank from previous “Under Credit watch with Developing Implications” on the above-mentioned instruments.

Additionally, CARE has given ‘CARE BB+’ rating each on Yes Bank’s Upper Tier II Bonds and Perpetual Bonds (Basel II) from previous ‘CARE D’. The Stable outlook was assigned here as well.

In its rationale note, CARE Ratings said, “The revision in the ratings assigned to the debt instruments of Yes Bank Limited (YBL) factors in the improvement in the credit profile of the bank post the implementation of the reconstruction scheme announced by the Reserve Bank of India (RBI) and approved by Government of India (GOI) from March 2020. The reconstruction scheme for YBL has brought about strong systemic support to the bank by various market participants including GOI, RBI and SBI acting in order to protect the depositors’ money by way of providing capital support, liquidity support and reconstitution of the board of directors for better governance.”

CARE also said the ratings remained constrained on account of stressed asset quality parameters as well as expected higher credit costs in the near to medium term on account of the Covid-19 related stress on the advances book. The bank has seen a significant decline in the scale of operations with a sizeable decline in its deposit base especially during Q4FY20 (refers to the period from January 01 to March 31); however, the bank has been able to increase its deposits during H1FY21 (refers to the period from April 01 to September 30), the granularity and proportion of the low cost Current and Savings Account (CASA) deposits remain moderate.

The ability of the bank to grow its scale through a build-up of granular advances and broad-based deposit mobilization would be a key monitorable, CARE added.