Mumbai: Yes Bank Ltd’s chief executive officer-designate Prashant Kumar said that there is enough liquidity to meet any requirement when the bank resumes normal operations at 6pm on Wednesday.
Addressing reporters a day before the lifting of a moratorium by the Reserve Bank of India (RBI), Kumar also said that he is confident that Yes Bank customers will not rush to withdraw or shift their funds to other banks.
“We have done extensive analytics about customer behaviour. We have seen that only one-third of customers have withdrawn ₹50,000 during the moratorium period. That is a huge comfort. They don’t have any apprehension or feel the need to withdraw or shift money more than is required in the normal course of business. Last four days, we have seen higher inflows than outflows," he said.
Seeking to further assure the bank’s customers, Kumar said that all ATMs and branches of Yes Bank have enough cash to meet the needs of customers once the moratorium is lifted. He also added that the bank has enough funding lines and there are no issues with liquidity.
Shares of Yes Bank have surged more than 11-fold from their lifetime low during the last seven sessions, after State Bank of India (SBI), along with eight lenders, agreed to a bailout package for the private lender. On Tuesday, the stock closed at ₹59.10 on NSE, up 59.3% from its previous close. The stock had hit a lifetime low of ₹5.50 a share on 6 March.
SBI chairman Rajnish Kumar, the largest investor in Yes Bank, said at the news conference that SBI remains committed to the investment and will not sell any part of its 48% stake before the expiry of a three-year partial lock-in period. The lock-in period was part of rescue efforts to ensure that Yes Bank remains well capitalized. Kumar also said that SBI could invest again if required in the second round of funding which is expected to take place in six months.
“I’m free to sell shares. Let me assure you for three years not a single share will be sold. But for any bank who has invested, everybody is expecting decent IRR (internal rate of return)," Kumar said.
On Monday, RBI also assured Yes Bank’s depositors that their money is in safe hands and there is no reason to withdraw cash in panic.
After the restructuring exercise and RBI’s assurance, rating firm Moody’s Investors Service on Monday upgraded its credit outlook for the lender to positive from negative.
Emkay Research said in a note to clients that it believes “the current moratorium on deposit withdrawal and capital infusion are just a first step toward the revival of Yes Bank and thus avoid systemic risk for the entire financial sector and economy in current testing times".
On 13 March, the government approved a rescue plan for Yes Bank backed by SBI. Under the plan, domestic investors including SBI, Housing Development Finance Corp. Ltd, ICICI Bank Ltd, Kotak Mahindra Bank Ltd, Bandhan Bank Ltd, Federal Bank Ltd and IDFC First bank have committed to invest ₹11,200 crore into Yes Bank.
On Saturday, Yes Bank reported a record loss of ₹18,564 crore in the quarter ended 31 December 2019 following a sharp rise in bad loans and higher provisioning. Provisions for the quarter stood at ₹24,765 crore. Gross non-performing assets (NPAs) as a percentage of total loans soared to 18.87% from 7.39% a quarter ago. Net NPA as a percentage of total loans stood at 5.97% compared to 4.35% last quarter.
Kumar, however, cautioned that there could be fresh additions to Yes Bank’s NPA of ₹8,500 crore, which he expects to recover in the next financial year, ensuring that credit cost or the amount set aside for bad loans remains nil.