Govt approves plan for SBI-led consortium to buy stake in YES Bank: Reports

Current Affairs
The legislature has affirmed an arrangement for State Bank of India to lead a consortium that will purchase stake in YES Bank, individuals up to date have told Bloomberg. SBI has likewise been approved to pick different individuals from the consortium.
Indeed Bank has battled to raise capital it urgently needs to remain above administrative prerequisites as it fights significant levels of terrible credits because of its introduction to upset divisions. The loan specialist has been attempting to bring $2 billion up in new capital for two quarters. In January, the bank said it had dismissed a $1.2 billion venture offer from Canadian financial specialist Erwin Singh Braich and Hong Kong-based SPGP Holdings - an idea about which numerous examiners had communicated question.
Truly Bank said in February that it will defer its December-quarter results by in any event a month. Prior in February, the bank downsized its gathering pledges plan considerably to Rs 10,000 crore, from about to $2 billion endorsed by the board in November, as it proceeded with its battle to get financial specialists. It would collect the cash, in at least one tranches, through Qualified Institutions Placement, Global Depository Receipts, American Depository Receipts, Foreign Currency Convertible Bonds, or some other strategies on a private situation premise.
In January, the rating office India Ratings and Research (Ind-Ra) kept up YES Bank's long haul backer rating of 'IND An' on rating watch negative (RWN) and pulled back its momentary guarantor rating of 'IND A1'.

How emergency at YES Bank unfurled: The emergency at YES Bank began path in 2018 when the Reserve Bank of India in September 2019 cut off the establishing advertiser Rana Kapoor's new three-year term as CEO of the bank till January 31, 2019. Truly Bank's offers failed 30 percent the following day and proceeded with the descending winding...READ MORE

Can a land bank be the solution to India's huge shadow bank crisis?

International News

When a well-capitalized shadow bank’s credit rating goes from A+ to D in 10 days, it shows how fragile lending to India’s builders has become. It also highlights the policy error of not addressing the root of the problem: land.
In June, three months before the unexpected default by Altico Capital India Ltd., I proposed a land bank that would buy stalled property projects from struggling developers. The bank would pay with government-backed debt securities, which the builders would use to repay loans.
To see how this could prevent liquidity problems from cascading into solvency issues, consider the Altico default. The Clearwater Capital Partners-backed firm missed a measly $2.8 million interest payment after its tight but manageable repayment schedule of $135 million became a squeeze at $233 million in the financial year that started April 1. The 63 cents of equity behind every dollar Altico owed to its creditors was of little help. Spooked by its $900 million-plus loan book for residential and commercial real-estate projects, two lenders exercised put options or reset the interest rates so high that they had to be prepaid.
India’s banks are rapidly losing faith in the shadow financiers that lend to property builders. A year after the collapse of IL&FS Group, a specialist infrastructure financier, the crisis of confidence is getting worse. Indiabulls Housing Finance Ltd. shares fell as much 38% on Monday after the central bank imposed lending restrictions on Lakshmi Vilas Bank Ltd., a deposit-taking institution the financier has been trying to merge with to bolster its funding sources.

 The nervousness with shadow banks isn’t about the quality of their retail loans, which are still fairly resilient. It’s their lumpy advances that are worrying investors. Dewan Housing Finance Corp., which defaulted in June, underwrites mortgages, but it also has $5 billion of exposure to developers...Read More