The board of India’ top lender, State Bank of India, agreed on Thursday to conduct a viability assessment into buying a stake in troubled private sector Yes Bank Ltd.
Yes Bank shares surged more than 25% after reports emerged that a group led by SBI will inject capital into the bank.
The board has recommended to undertake a viability study before taking a decision on Yes Bank.
SBI had been authorised to pick other members of the consortium in the plan approved by the Indian government,Two senior finance ministry officials, directly involved in the matter, said “the commercial decision would be taken by the SBI board” and different options were on the table.
SBI shares fell as much as 5.4% on the report, before reversing course to close 1% higher.
Yes Bank said in a filing with the stock exchanges that it was not aware of any such decision, while SBI said it would abide by timelines for disclosures.
Yes Bank has struggled to raise capital it needs to stay above regulatory requirements as it battles high levels of bad loans. India’s fifth-largest private sector lender has been trying to raise $2 billion in fresh capital since late last year, and in February delayed its December-quarter results.The more the delay in capital raising, more is the systemic risk engendered by Yes Bank’s failure.
In January, the bank said it had rejected a $1.2 billion investment offer from Canadian investor Erwin Singh Braich and Hong Kong-based SPGP Holdings – an offer about which many analysts had expressed doubt.