The Present Situation of Yes Bank: Deposit Safety and Liquidity Analysis
YES Bank, a prominent financial institution in India, has been under scrutiny due to recent economic challenges. This article provides an in-depth analysis of the bank's current status, focusing on deposit safety and liquidity. We will also explore recent investor interest in Yes Bank and the regulatory environment that ensures financial stability.
Quarterly Results and Investor Interest
Recent quarterly results from YES Bank have shown positive trends. A significant development has been the confirmation of an investment of approximately (1) billion from an investor abroad, as reported in the Economic Times. It is essential to note that the Reserve Bank of India (RBI) plays a crucial role in ensuring that banks in India operate robustly and do not fail.
Deposit Safety: The Most Pertinent Question for Customers
For any YES Bank customer, the primary concern is often: Is My Deposit Safe? This section aims to address this question comprehensively:
If the situation were to deteriorate, will depositors be able to recover their funds? Here, we examine the financial health and potential to meet deposit repayment obligations.
According to the most recent press release, YES Bank's total advances were Rs. 2.32 lakh crores while deposits stood at Rs. 2.09 lakh crores. In the event that all depositors requested their funds back, this would require the bank to find Rs. 209000 crores. However, some of this amount is held as collateral against loans, thus reducing the immediate need for liquidity.
An Analysis of YES Bank's Liquidity Position
To evaluate the bank's liquidity capabilities, we examine its liquid assets and resources available to meet the demand for deposit repayments.
Cash and Balance with RBI: YES Bank had a cash balance and balance with RBI of Rs. 10800 crores as of March 2019, and Rs. 16200 crores of balances with banks and money at short notice.
High-Quality Liquid Assets (HQLA): YES Bank had High-Quality Liquid Assets (HQLA) totalling around Rs. 58900 crores, which included government securities held as part of this definition. Additionally, around 6000 crores were available in other deposits outside the HQLA. The total liquidity base, including HQLA and government bonds, stands at approximately Rs. 65000 crores. Adding the Cash Reserve Ratio (CRR) held at the RBI, this brings the total cash and liquid assets to around Rs. 75000 crores, or 36% of total deposits.
Borrowings: The bank also has borrowings of Rs. 108000 crores, primarily Tier II and Perpetual bonds, and refinancing loans or infrastructure bonds that are linked to underlying assets and thus do not need to be paid back on demand.
From the loan side, YES Bank has total loans of Rs. 2.32 lakh crores and investments of Rs. 76000 crores. Some known issues include Rs. 10000 crores in problem loans and 29000 crores of loans rated BB or below. Assuming a 25% haircut on the portfolio, this would yield Rs. 174000 crores, which is sufficient to cover the remaining deposits.
Challenges and Potential Solutions
Despite these liquidity challenges, analysis suggests that YES Bank is well-positioned for deposit repayment. The ability to sell the loan portfolio at a realistic value or through the liquid assets provides a safety cushion. Moreover, the RBI has promised regular monitoring and liquidity support, which is critical in ensuring financial stability in large banks like YES Bank.
Conclusion
The liquidity analysis of YES Bank indicates a sustainable position for deposit repayment, with sufficient reserves and a potential loan portfolio to handle any demands. Given the regulatory oversight and regular support mechanisms in place, your deposits at YES Bank are considered safe. Investors abroad and domestic stakeholders can take reassurance from the current financial health of the bank, supported by the reassuring statements from the RBI.