Even as the administrator sought to soothe depositors’ nerves, analysts are predicting that once the withdrawal cap is removed, the bank might face an outright exodus of small deposits.
Depositors may soon be able to withdraw more than the Rs-50,000 cap set by the regulator by Saturday, the bank’s administrator Prashant Kumar told some news outlets on Monday in a bid to reassure depositors. This comes after the bank said last Saturday that cash was available for its debit card holders at all ATMs.
Even as the administrator sought to soothe depositors’ nerves, analysts are predicting that once the withdrawal cap is removed, the bank might face an outright exodus of small deposits. “We believe, unless measures are taken to the contrary, Yes may see elevated deposit outflows after the moratorium is lifted,” analysts at HDFC Securities said in a note.
The manner in which the moratorium has been imposed and the widespread sense that Yes Bank is a failed bank could have a bearing on the deposit franchise of other private banks. Anand Rathi Share and Stock Brokers said, “Given the recent events (including at PMC and Yes), new age private banks and smaller regional banks may see slower deposit growth. Although the regulator and the government have in both cases stepped in to safeguard the interests of depositors, we expect retail investors to park their deposits in PSBs (public-sector banks) and select larger private banks.”
At least in the near term, deposit growth in new-age private and smaller regional banks could significantly slow down, the broking firm said in a report. Consequently, their cost of funds could rise and margins could shrink. Even loan growth could slow down at private banks with higher credit/deposit (C/D) ratios.
There are also concerns around whether the proposed equity infusion of up to Rs 10,000 crore by State Bank of India (SBI) would be enough to cover for the stress in Yes Bank’s books, let alone paying out its depositors. According to the HDFC Securities note, the size of Yes Bank’s BB and below-rated book alone stands at Rs 31,400 crore and its net non-performing assets (NPAs) add up to Rs 9,800 crore. If the entire BB and below-rated book were to turn bad, the quantum of unprovided NPAs would soar to over Rs 40,000 crore. “It is difficult to assess the quantum of stressed exposure at YES (fund plus non-fund based) and possible addition to the same. In the event funds infused are not able to offset the increase in NPLs and required provisions, the scheme may not succeed.”