Last Updated on Sep 3, 2021 by Manonmayi
Multiple investors expressed interest in Yes Bank for setting up an asset reconstruction company (ARC). This is a type of financial institution that buys a bank’s bad loans at a mutually agreed price to recover the debts or securities on its own. The ARC in question would be an 80-20 joint venture between external investors and Yes Bank, which will be a minority investor. While Yes Bank will not have any controlling rights in the ARC, they will retain protective rights, which entitles them to receive timely information about its investment strategy.
Yes Bank has received interest from 12 entities for setting up the ARC. These include Brookfield Asset Management, Ares SSG, and Oaktree Capital Management. By October, the bank will shortlist potential investors after holding discussions with them and evaluating the compatibility of the partnership.
The bank had submitted their first proposal for setting up the ARC to the RBI earlier this year. But the Central Bank had rejected the plan citing conflict of interest. The current set of ARCs are not well-capitalized and cannot handle bad loans. Hence, Yes Bank is planning to transfer the entire asset pool to the new ARC.
Among other reasons, poor governance led Yes Bank to its current state of woes. Ever since the bank’s collapse, investors are getting weary of entities that hint at poor governance. A recent example of such investor behaviour can be seen in AU Small Finance Bank, which plunged 13% on Tuesday after the bank announced the resignation of their CRO. Notably, the CRO had resigned back in July and the bank delayed the announcement. Previously, two of their top executives had also resigned in March.
