Credit Rating agency Moody's Investors Service has placed Yes Bank's ratings under review for a potential downgrade. The review will be considering facts and figures related to the slowing economy and the lack of liquidity in the fields of non-banking financial companies (NBFC) and Housing Financial companies (HFC) in which the bank has invested extensively.
The exposure of the bank to NBFC and HFC was about 6.4 per cent of the total exposure. Considering the liquidity problem in real estate; Moody's doubts that the 7 per cent direct investment in the sector might slip into non-performing assets (NPA).
Moody's shows concerns about the 4.1 per cent of loans which represent about Rs 10,000 crore under watch list which could potentially ruin the company's stability if turned into NPA within 12 months.
"The bank's weak performance in fiscal 2019 led to its capital, as measured by the common equity tier 1 ratio, falling to 8.4 per cent from 9.7 per cent in fiscal 2018... If Yes Bank cannot raise the capital, its loss-absorbing capacity and therefore financial profile will be under pressure," said Moody's, Economic Times reports.
The agency also cautioned the bank about its financial profile after considering the bank's plan of raising funds worth $1 billion. The failure to which might result in the loss absorption capacity of the bank.
The agency has cleared the bank that there will be a downgrade in ratings if the loans were not revived from the debtors and if there is a decline in capital ratio.