Private lender IndusInd Bank’s deposits fell 6.6% sequentially to around Rs 2.02 lakh crore in the fourth quarter of FY20. Deposits grew 4% year-on-year (y-o-y). Last month, the bank said that almost two-third of the reduction in deposits was from government-related accounts. The decline in deposits resulted in IndusInd Bank’s current-account-savings-account (CASA) ratio falling 190 basis points (bps) sequentially to 40.5% during the March quarter. Retail deposits and deposits from small business customers grew 2.7% sequentially to Rs 62,587 crore during the quarter.
Last week, the bank said its immediate priority was to consolidate and build resilience in the wake of the Covid-19 pandemic. The bank’s newly-appointed MD and CEO, Sumant Kathpalia, had earlier said that liabilities would lead the way to asset growth, and not the other way round. “We will be putting greater emphasis on creating a sustainable organisation,” Kathpalia said.
In a business update last month, the bank said it expected deposit traction to rebuild in April, adding that it will reduce reliance on government and bulk deposits going forward. “Chunky exposures are on their way out of this bank and I don’t think we will do large chunky exposures anymore… Yes, we have lost some deposits, but we do tend to toggle between deposits and borrowings. Deposits were coming under stress in the sense that state governments did pull out bulk money. Obviously, you cannot get it back immediately,” the management told analysts in a call last week, adding that some public sector enterprises also did not roll over their deposits with the bank.
Meanwhile, despite the challenging economic environment, the private lender’s net advances grew 1.2% sequentially to Rs 2.09 lakh crore. Net advances grew 13.4% y-o-y. Liquidity Coverage Ratio (LCR) for the quarter ended March 31 stood at 112.18%, compared with 113.57% during the previous quarter. The bank had earlier flagged off risks to its asset quality from the disruptions caused by the state-imposed lockdown. IndusInd Bank’s management said it expected credit costs inching up in the commercial vehicles (CV) segment, and it would close FY20 with a credit cost of 80 bps or 0.8%. CV loans account for 12% of IndusInd Bank’s loan book.
Shares of IndusInd Bank were trading up 19.06% at 2:30 pm, at Rs 372.95 on BSE. In the wake of the recent moratorium and eventual restructuring of Yes Bank in March, private lenders have battled perception issues. Following the events involving Yes Bank, the central bank wrote to chief secretaries of states appealing to them not to transfer deposits out of private banks and assuring them that apprehensions about the safety of deposits with private lenders were misplaced.