Private sector lender IndusInd Bank reported a 7% drop in deposits in the March quarter due to withdrawals triggered by the Yes Bank crisis
New Delhi: Private sector lender IndusInd Bank reported a 7 percent drop in deposits in the March quarter due to crisis-triggered withdrawals from Yes Bank.
The bank’s deposit base fell to Rs 2,02,303 crore in the quarter ended March, from Rs.216,713 crore in the previous quarter, the bank said in a regulatory deposit late on Monday.
As a result, the bank’s current account savings account (CASA) ratio fell to 40.5% in the fourth quarter of 2019-2020, from 42.4% in the third quarter.
Regarding financial health, IndusInd Bank, promoted by Hinduja Group, saw the withdrawal of bulk deposits from banks after the Reserve Bank of India (RBI) replaced the board of Yes Bank in early March.
However, the bank reported a marginal 1.2% increase in net advances in the quarter to Rs 2,009,914 crore, from Rs 2,007,413 crore in the December quarter.
He further said that retail deposits and small business deposits in accordance with liquidity coverage ratio (LCR) regulations also saw some improvement to Rs 62,587 crore from Rs 60,939 crore in the third. quarter of 2019-2020.
Last month, the bank said deposits fell 10-11% and nearly two-thirds of the reduction was due to government-linked accounts – this is largely linked to the general position of banks in the sector. private.
“This will also lead to a lower CASA ratio, but will reduce our dependence on this category for deposits in the future,” IndusInd Bank said.
Last week, Moody’s Investors Service placed IndusInd Bank’s ratings under review for downgrading due to concerns about asset quality.
The rating action reflects downside risks to asset quality in a deteriorating macroeconomic environment and financial market volatility, the rating agency said in a note.
The proportion of microfinance and vehicle finance for IndusInd Bank is higher than its peers and these loans have a high risk of being affected due to the current stress as they have limited repayment capacities, he said. .
The bank’s funding is also low compared to other rated Indian banks, as evidenced by its high concentration of deposits and low share of retail deposits, the agency said adding that this makes the bank more susceptible to upheaval. in financial markets, including wholesale markets. funding sources.
India Ratings, the Indian subsidiary of Fitch Group, also revised its outlook downwards from stable to negative.
The revised outlook takes into account possible greater challenges for the bank than for its peers with respect to its deposit base, due to its above-average dependence on institutional deposits and funding, a India Ratings said in a statement.
This could lead the bank to access other funding avenues such as borrowing and capital market instruments in a difficult operating environment (lockdown caused by the coronavirus), he said.