Private sector banks, especially the smaller ones, are likely to face the heat of the Yes Bank collapse, as funds will be hard to come by in the wake of the trust deficit — the most important component of the financial system.
According to top executives from five different fund houses, many big-ticket investors have become averse to parking their monies with private banks after the collapse of Yes Bank. As of date, at least three private sector lenders are actively in search of funds to buffer up their capital base — which has been depleted due to stress in their loan-books.
"It is very difficult to garner funds now. The Yes Bank collapse has raised serious concerns over the governance of banks," an executive from one of the fund houses told DH.
The fund houses also expect solvency ratios of other banks to be hit with the Yes Bank collapse. "With the capital adequacy ratios going haywire, banks may have to raise capital just to ride out the crunch if any. RBI is already in Troubled Asset Relief Programme (TARP) mode so that the risk is mitigated," an executive of yet another fund house said.
With a full-fledged large bank collapsing months after a co-operative bank (PMC Bank) went bust last year, there may be a huge outflow of depositors.
"Given the recent events, new-age private banks and smaller regional banks may see slower deposit growth. Although the regulator and the government have in both cases stepped in to safeguard the interests of depositors, we expect retail investors to park their deposits in PSBs and select larger private banks," according to brokerage firm Anand Rathi.
At least in the short run, all analysts expect deposit growth in new-age private and smaller regional banks to significantly slow down. This is likely to hit the current account saving account (CASA) deposit level of the banks.
In a build-up to its collapse, Yes Bank had seen a quarter of its deposit base erode in just six months' time.
Since the collapse of Yes Bank on Thursday, the Nifty Bank index crashed by 8%, while the Nifty Private Bank index collapsed by 9% in just two trading sessions — indicating a bear in the bank stocks.