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IndusInd is in the midst of a management shift as incumbent CEO Romesh Sobti makes way for Sumant Kathpalia from 24 March. (Mint)
IndusInd is in the midst of a management shift as incumbent CEO Romesh Sobti makes way for Sumant Kathpalia from 24 March. (Mint)

IndusInd Bank reports nearly 2% erosion in deposit base

  • The private sector lender is working with its customers to reassure them against potential risks
  • IndusInd shares plunge as much as 36.6% intraday on Wednesday, before recovering partially to close 23.9% lower

MUMBAI : IndusInd Bank Ltd’s deposit base has eroded by nearly 2% as some state governments shifted deposits from the private lender.

The bank is working with the customers to reassure them against potential risks, IndusInd Bank said in a regulatory filing late on Tuesday.

“We are engaging with them to reiterate the stance of the regulator that government deposits in all private sector banks are safe," the bank said. While IndusInd did not say when these deposits were withdrawn, they are believed to have happened in recent weeks.

The bank also said that in the wake of the significantly higher level of market rumours and speculation around its stock, it would like to reiterate that the bank is “financially strong, well-capitalized, profitable, and a growing entity with strong governance."

This comes close on the heels of another private lender RBL Bank reporting on Tuesday a 3% erosion of deposits. As on 31 December, IndusInd Bank’s deposit base stood at 2.16 trillion, up 23% from the same period last year. The bank’s total business—sum of advances and deposits—stood at 4.24 trillion, up 22% from Q3FY19.

According to industry analysts, the Yes Bank fiasco and the ensuing fear among depositors seem to have affected several private banks, with large customers withdrawing deposits despite multiple assurances from the Reserve Bank of India (RBI).

Despite IndusInd’s assurance, investors are still jittery and the stock plunged as much as 36.6% intraday to 383.1 on BSE on Wednesday, before recovering partially to close at 459.85, down 23.9% from its previous close. Since the announcement of Yes Bank’s moratorium on 5 March, IndusInd’s shares have fallen 57.21% from 1,074.

Meanwhile, the Supreme Court said on Wednesday that self-evaluation of adjusted gross revenue (AGR) dues by telecom companies was a violation of its order. This added to investor worries owing to IndusInd’s exposure to Vodafone Idea. State Bank of India (SBI) has the largest exposure at 11,200 crore, followed by Yes Bank at 4,200 crore and IndusInd Bank at 3,400 crore, according to estimates by Macquarie Research.

IndusInd said market rumours about individual exposures are “bloated and outlandish and nowhere near the truth." It said while December quarter gross non-performing asset (NPA) ratio was at 2.18%, gross NPA ratio this quarter is expected to stay “pretty much in line with that."

“We expect our net NPA of 1.05% as at the last quarter to fall below 1%, in line with our ambition to take provision cover beyond 60%," it said.

Analysts believe that while stressed loans have had a bearing on IndusInd’s shares, its sectoral exposures are not alarming. “In the corporate book, high loan growth in the past was not at a variance with peers and is now slowing down, the rating mix is stable and sectoral exposures are not alarming. Retail NPAs, while inching up, are within the expected range and compare well with peers," HSBC Securities and Capital Markets (India) Pvt Ltd said in a note on 21 February.

The bank also said its promoter, the Hinduja Group, is awaiting RBI’s decision on its plan to raise the promoter stake to 26%.

IndusInd is in the midst of a management shift as incumbent chief executive Romesh Sobti makes way for Sumant Kathpalia from 24 March.

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