State Bank of India (SBI) has received approval from its Executive Committee of Central Board (ECCB) to buy stake worth INR72.5bn ($974.5m) in troubled lender Yes Bank.
As per the plan, SBI will purchase 7.25 billion shares in India’s fifth-largest private sector lender at INR10 per share.
Yes Bank, which operates over 1,000 branches across all 29 states in India, was put under moratorium last week by the Reserve Bank of India (RBI).
SBI in a statement to stock exchanges said that its shareholding in Yes Bank will be within the 49% post-reconstruction.
However, the share purchase by SBI is still subject to receipt regulatory permissions.
SBI, the country’s largest public sector bank, was to inject INR24bn ($324m) capital to acquire a 49% stake in the troubled lender as per the draft reconstruction plan.
Starting from the date of injecting the capital, SBI will not slash its stake in Yes Bank to less 26% before completing three years.
Yesterday, local media reports suggested that apart from SBI other private sector banks including ICICI Bank, HDFC, and Kotak Bank could participate in the bailout process of Yes Bank.
These banks, according to reports, were approached to place short-term deposits to bailout Yes Bank.
However, there is no clarity yet on whether more banks will come forward to rescue Yes Bank.
Yes Bank has been struggling to raise sufficient new capital to boost its capital ratio and cover potential loan losses.