Yes Bank has completed the transfer of bad loans worth Rs 48,000 crore to private equity firm J.C. Flowers, a move that will help to strengthen its balance sheet.

This is by far the largest sale of bad loans in the banking sector. More than two years back, Yes Bank ran into trouble with its rise in non-perming assets (NPAs) and the Reserve Bank of India (RBI) had to intervene. The government got State Bank of India (SBI) as the anchor to bail out Yes Bank.

Yes Bank managing director and CEO Prashant Kumar termed the development, along with the recent capital raise, as another strategic milestone in the turnaround journey of the bank. "This transaction would further strengthen our balance sheet, allowing the bank to focus fully on growth and profitability as future strategic objectives," he said.

Kumar further believed that the JC Flowers ARC platform would serve as a model and allow other Indian financial institutions to tap and monetise the considerable interest of global investors in the distressed credit markets.

As part of a competitive process conducted by the bank, JC Flowers ARC had submitted a binding bid of Rs 11,183 Crores, under a 15:85 structure (15% cash and 85% security receipts) for assignment of a pool of identified stressed assets of the bank, for the position, as on March 31, 2022.

Later, with an objective for value maximisation, Yes Bank conducted a transparent bidding process based on the Swiss Challenge method under the aegis of RBI's master direction on the transfer of loan exposures. The process was conducted with the bids submitted by JC Flowers being designated as the 'Base Bid'.

In a meeting held on 20 September, Yes Bank's board declared JC Flowers ARC as the winner of the Swiss Challenge process.

Recently, Yes Bank allotted equity shares and equity share warrants on a preferential basis to private equity investors Carlyle and Advent International for a consideration of Rs 8,887 crore. Subsequently, Carlyle and Advent now own 9.99% each of the post-issue paid-up share capital of the bank.