YES Bank shares rise 4% after Moody's upgrades rating

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"Moody's has changed the outlook on Yes Bank's ratings where applicable to positive from stable, reflecting Moody's expectation of a further improvement to the bank's credit profile, driven by a clean up of legacy stressed assets and/or improvements to its capital and profitability,” the press release said.

Moody's has also upgraded Yes Bank's Baseline Credit Assessment (BCA) and Adjusted BCA to b3 from caa2. The improved financials metrics are reflected in the two-notch upgrade of the bank's BCA to b3 from caa2.

The bank plans to transfer a large share of non-performing loans to an asset reconstruction company over the next 12 months.

“Subject to the terms and conditions of the transaction, Moody's expects the NPL transfer will be credit positive as it will ease the management burden on resolving legacy problem assets and help the bank focus on growing its assets and liabilities,” the release stated.

Moody's expects Yes Bank will need to raise new equity capital in the next 12 months to support asset growth because its modest profitability does not support internal capital generation.

At 10:44 am, shares of the bank were trading 2.2 percent higher at Rs 13.31 on the BSE. The stock has gained today after three days of consecutive losses.