Private lenders witness high deposit withdrawals after fall of YES Bank

Private sector lenders are witnessing substantial erosion in their deposit base after the fall of YES Bank, primarily due to the withdrawal of bulk deposits by several state governments.

Two of the private sector lenders -- IndusInd Bank and RBL Bank -- have reported up to 11 per cent erosion in their deposit base.

In an investor presentation made to Mirabillis Investment Trust, IndusInd Bank has said that its deposit base has come down by 10-11 per cent in the March quarter. The bank's total deposits at the beginning of the March quarter stood at Rs 2.17 lakh crore, which would mean net withdrawals are anywhere between Rs 21,500 crore and Rs 24,000 crore during the just-concluded quarter.

The bank, however, attributed it to the bulk withdrawals by the state governments. As of end of December quarter, IndusInd Bank's CASA ratio stood at 42.40 per cent.

"Almost two-thirds of reduction is on account of Government related accounts – this is largely related to general private sector bank stance. This will also result in lower CASA ratio but reduce our dependency on this category for deposits in the future," the bank said in the presentation.

It also said that the Bank has witnessed erosion in wholesale and retail deposits as well.

The shares of IndusInd Bank have witnessed huge wealth erosion since the fall of YES Bank on March 5 and are trading at Rs 342.3 apiece -- less than one-third of its value a month ago.

On the other hand, yet another private lender RBL Bank has said that it has seen an 8 per cent erosion in its deposit base. "Some run-offs of deposits are seen in this quarter (under 8 per cent). However, reduction is essentially in bulk deposits from government entities/ corporations," the bank said.

At the end of third quarter ended December 2019, RBL Bank had a deposit base of Rs 62,907 crore. This means a net withdrawal of around Rs 5,000 crore in this quarter. The CASA ratio of the bank stood at 26.8 per cent at the end of December quarter.

Shares of RBL Bank are trading at Rs 131.35 per scrip on BSE, 56 per cent down since the fall of YES Bank.

Any bulk withdrawal from the bank, put pressure on the current accounts- savings accounts (CASA) -- the cheapest source of funds for the bank.