Yes Bank has received a revised rating from CARE Ratings for its various debt instruments. The announcement was made late on Monday.

What Happened: The ratings for Yes Bank’s Infrastructure Bonds and Tier II Bonds have been revised from CARE A; Positive to CARE A+; Stable. The Certificate of Deposit rating remains at CARE A1+. The revision comes in light of Yes Bank’s continued growth in advances, improvement in the proportion of retail lending and small & medium enterprises (SME), and reduction in higher ticket corporate lending.

The bank’s capitalisation level, supported by the receipt of ₹2,845 crore towards the conversion of share warrants during Q1FY25, also contributed to the revised ratings. The ratings, however, are constrained due to the bank’s continued dependence on wholesale/bulk deposits.

The stable outlook is based on the improvement in the bank’s performance, retail and wholesale mix, proportion of retail deposits, and asset quality parameters, which are expected to continue in the near term.

The bank’s track record in retail and SME loans remains limited and needs to be monitored over time. The bank also continues to have a Priority Sector Lending (PSL) shortfall, leading to higher RIDF deposits, affecting its profitability. Furthermore, the proportion of stressed assets remains relatively higher.

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CARE Ratings has considered Yes Bank’s Capital Adequacy Ratio (CAR), capital raising ability, and profitability during the long tenure of the instruments. The rating also factors in the additional risk arising due to the existence of the lock-in clause in hybrid instruments.

This rating revision by CARE follows a series of positive revisions by other rating agencies. In July, ICRA upgraded Yes Bank’s ratings citing consistent operational growth and a decrease in stressed assets. In August, both CRISIL and India Ratings and Research upgraded Yes Bank’s ratings, citing granular lending focus, improved deposit profile, better asset quality metrics, and an increasing share of SME and retail portfolios.

Earlier in the month, media reports suggested that the bank’s stake sale process has hit a roadblock with the Reserve Bank of India reportedly turning down the State Bank of India‘s bid to offload its majority stake.

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