Private sector lender Yes Bank’s proposal to set up an asset reconstruction company (ARC) has been denied by the Reserve Bank of India (RBI), reported Mint, citing two sources.

Most of the overwrought loans of Yes Bank are declared fraud cases and cannot be transferred to an ARC. Therefore, citing a conflict of interest, the proposal was declined, the report stated.

The bank was anticipating to transfer nearly Rs 500 billion of bad loans to the ARC, reported Reuters.

“We are likely to put in an initial capital of Rs 10 billion while the foreign investor will put in nearly Rs 25 billion,” Prashant Kumar, CEO of Yes Bank, told Reuters.

As of December 31, Yes Bank had reported bad loans as a percentage of total assets at 15.36 percent. Without the apex court’s stay on asset classification, the gross non-performing assets (NPA) ratio would have been 20 percent.

The lender has also initiated a debt recast for loans worth Rs 8,062 crore as of December 31, but these have not yet been carried out. The RBI has provided banks three months to enforce retail recasts and six months for corporate loans.