Yes Bank Plans for ARC, Invites EoIs from Investors

Yes Bank is planning to establish its own asset reconstruction company (ARC) resultant it has invited an expression of interest (EoI) from potential investors who could associate with it in developing this entity.

Through its process advisor, Ernst & Young, YES Bank has called for EoIs from investors with strong financial capability and possessing substantial experience in the distressed asset space.

In its advertisement, the bank states, “The prospective partners will be the lead partner/ sponsor of the ARC, with the bank as the other significant partner/sponsor, for conducting the business of the asset reconstruction in adherence with existing RBI guidelines governing identification, sourcing, and resolution of stressed financial assets”.

Also, the ad reads, the prospective investor should have minimum assets under management and funds deployed globally to the tune of $5 billion in the immediately preceding financial year. Also, the investor should have the ability to commit funds for investment or deployment in Indian companies or Indian assets or approximately $0.5 billion.

Apart from that, the investor has to satisfy the Reserve Bank of India (RBI’s) fit and proper criteria, and demonstrate global experience in dealing with distressed assets and have a track record of resolution of distressed assets.

Previously, the private lender had attempted to initiate an ARC so that it could shift some of its bad assets to that ARC, in an attempt to clean up the balance sheet. However, RBI had reservations about the structure of the ARC that the bank was looking to set up, with itself as the majority owner. Presently, the bank is expecting to be a minority partner.

Besides, in April, the RBI formed a six-member panel headed by Sudarshan Sen, former executive director, to carry out a comprehensive review of the working of ARCs in the financial sector ecosystem. The panel is tasked with recommending suitable measures for enabling such entities to meet the growing requirements of the financial sector.

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