Banking With Uncertainty

The Yes Bank turmoil came with a one-off solution, but newer banks will not be spared from the contagion effect. And Covid-19 will only hurt retail lending more

- SALIL PANCHAL

As soon as the moratorium for Yes Bank was lifted on March 18, entrepreneur Jasjeet Kaur went online and withdrew most of her money from her proprietorship account. “If I keep the money any longer and some other crisis breaks out, I would be the biggest fool,” says Kaur, whose company sources lighting equipment for hotels, private companies and banquet halls.

She also had a housing loan linked with Yes Bank whose EMI was being paid by ECS (electronic clearing service), which she has now switched to ICICI Bank. “I was never happy with the customer service of Yes Bank… it had new relationship managers [RMs] every two months. The moratorium was announced on March 5 when we usually plan for salary expenses and other business outflows. When I called up my RM, he said he was not aware of any such development at the bank,” says Kaur, who had been banking with the troubled private sector bank since 2017 as it was close to her residence.

Kaur’s experience is not an aberration. Yes Bank has seen a sharp 39 percent erosion in deposits in nearly 12 months—from ₹227,601 crore in March 2019 to ₹137,506 crore as of March 5, 2020. The bank also saw a considerable deterioration in asset quality and had to increase provisioning for bad loans. And alarmingly, its common equity Tier1 (CET1), a key matrix, was at 0.6 percent against a minimum regulatory requirement of 7.37 percent.