ANTICIPATING TROUBLE in the wake of its failure to get capital infusion and rising non-performing assets, Yes Bank depositors pulled out over Rs 18,000 crore between April and September last year with experts not ruling out another 10-20 per cent more withdrawals from October 2019 to February 2020.
Early Sunday, Yes Bank founder Rana Kapoor was arrested in Mumbai by the Enforcement Directorate (ED) on alleged money-laundering charges and remanded in the agency’s custody till March 11 by a local court.
According to the bank’s Annual Report and rating agencies, deposits fell to Rs 2,09,497 crore as on September 30, 2019, from Rs 2,27,610 crore on March 31, 2019, a decline of 8.64 per cent.
During 2019-20, other banks witnessed a rise of 9.2 in deposits though they slashed deposit rates across the board after the 135 basis points reduction in Repo rate.
While Yes Bank had witnessed further withdrawals after September 2019, it is yet to release the figures officially as the December quarter results are being delayed due to the problems in the bank. Deposits would have come down by another 10-20 per cent since September 2019, said sources.
A Gujarat-based industrial group is believed to have pulled out its funds from the bank a month ago. Tirumala Tirupati Devastanam Friday said it withdrew deposits of Rs 1,300 crore on maturity in October 2019. Vadodara Smart City Development Company, a special purpose vehicle controlled by the Vadodara Municipal Corporation (VMC) withdrew Rs 265 crore from the bank a day before the RBI stepped in last week to cap withdrawals last week.
S K Patel, CEO of the Vadodara company, was not available for comment.
Rating agencies are keeping their fingers on the bank’s ability to retain the deposits after the resolution. “The central bank’s takeover of Yes Bank appears intended to restore depositor confidence. However, we believe that there is a risk that the RBI’s move could backfire if it prompts depositors to shift their money to institutions that are perceived to be safer. This could pose liquidity challenges, particularly for smaller private banks with weaker franchises or more limited access to support from parent entities,” Fitch Ratings said in a report.
Funds of many companies are locked in the bank after the RBI slapped curbs on withdrawals. As on March 31, 2019, the deposits of top 20 depositors aggregated to Rs 24,673 crore, representing 10.84 per cent of the total deposit base, according to Yes Bank’s Annual Report.
The bank reported a 44 per cent rise in its deposit base from Rs 157,989 crore in September 2017 till March 2019. That was the period when the bank was doing well and the RBI initiated the asset quality review. The bank’s deposit base was Rs 222,837.9 crore in September 2018.
On Friday, the RBI unveiled a reconstruction scheme indicating the possibility of State Bank of India, India’s largest bank, acquiring a 49 per cent equity stake in the private sector lender. On Saturday, SBI chairman Rajnish Kumar said depositors’ money in Yes Bank is safe. “Maybe because of the Rs 50,000 requirement (cap on withdrawals), it is a matter of a few days that there is some inconvenience. But as far as safety of their money’s concerned, Finance Minister and Governor of the RBI… everybody has assured and I feel is the right assurance that depositors money is not at all at risk,” he said.
With large-sized withdrawals disallowed, a number of companies availing of facilities from Yes Bank could face disruption in their operations, which may constrain their ability to service financial obligations on time, rating agency Crisil said in a report.
“In addition, some companies may also have parked their surplus liquidity with Yes Bank or invested in its bonds. There are also some securitisation transactions of other originators where Yes Bank is a counterparty – either as the bank where credit enhancement in the form of fixed deposits is being maintained, or as the collection and paying agent for the transaction,” it said. Yes Bank is also an issuing and paying agent for commercial paper.
V K Vijaykumar, Chief Investment Strategist, Geojit Financial Services, said, “Yes Bank’s problem has been a market concern for many months now. The RBI preferred, and rightly so, an internal resolution of the problem through capital infusion. But now the central bank has acted since the bank management failed to raise capital. A quick resolution can be expected. There is no systemic issue or contagion consequences. There is no need to panic.”
Yes Bank’s troubles started early last year even as the RBI slapped curbs and limited withdrawals in Punjab and Maharashtra Co-operative Bank following reports that real estate developer HDIL group had defaulted 73 per cent of the lender’s total loan book. However, the RBI has since relaxed the caps on withdrawals from PMC Bank.