Yes Bank crisis impact: Your money’s safe, private banks tell depositors


Mumbai: The Yes Bank crisis is having a contagion impact on other private banks, forcing these lenders to clarify their position and address depositor concerns on their capital base and liquidity.

RBL Bank, Karnataka Bank and South Indian Bank, in separate communications to their customers, have clarified that rumours around their financial health and stability are untrue and not based on facts. This also follows an RBI clarification about the safety of banking deposits on Sunday.

“Concern has been raised in certain sections of the media about the safety of deposits of certain banks. This concern is based on analysis which is flawed. Solvency of banks is internationally based on capital to risk weighted assets (CRAR) and not on market cap. RBI closely monitors all the banks and hereby assures all depositors that there is no such concern of safety of their deposits in any bank,” RBI said in a two part tweet.

RBI’s tweets were in response to an erroneous comparison by a news channel between the ratio of deposits and market capitalisation of private sector banks, which subsequently went viral through whatsapp forwards. On Monday and Wednesday, these lenders also came out with statements debunking these theories. In a statement on Wednesday, RBL Bank emphasised that it is fundamentally a strong institution.

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“Rumours around financial health and stability of the institution, especially in social media, seem to be misplaced, motivated and not based on facts,” the bank said, adding that its CRAR at 16.08% is higher than the prescribed minimum of 11.5% and liquidity coverage ratio (LCR) is at 145% of statutory requirements as at the end of last week.

Similarly, South Indian Bank (SIB) on Monday pointed out that its CRAR at the end of January is at 13.12%, higher than the RBI prescribed 10.87%. “SIB is a pan-Indian bank with more than 900 offices and a sizeable business of Rs 1.50 lakh crore as on December 31, 2019. The bank’s operating profit has grown steadily from Rs 884 crore in fiscal 2013-14 to Rs 1,239 crore in fiscal 2018-19,” the bank said.

Karnataka Bank COO YV Balachandra also addressed concerns in a letter to employees. “The solvency of a bank cannot be measured minute to minute with the change in market cap. Market cap ratio is a mischievous and misleading invention by a particular TV channel and is an incorrect way of assessing the safety of banks. It may be noted that the bank has been consistently maintaining CRAR well above the regulatory requirement of 9%.”





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