 "YES Bank says RBI steps unlikely to hit its profits")
YES Bank on Wednesday dismissed fears its profits would go down following steps taken by the Reserve Bank of India (RBI) to address exchange rate volatility and curb liquidity.
"There has been an overreaction in money markets in the aftermath of RBI's recently announced measures to stabilise the rupee. While the knee-jerk response has resulted in hardening of rates, I believe the full impact of these measures would eventually assuage sentiment and restore normalcy in money markets," Rana Kapoor, co-founder, managing director and chief executive, said in a statement.
On Monday, RBI had decided to cap the daily liquidity adjustment facility at Rs 75,000 crore, increase the marginal standing facility rate to 10.25 per cent and sell government bonds worth Rs 12,000 crore through open market operations. The moves resulted in a rise in bond yields and money market rates.
YES Bank, however, played down the concern. "The concept that we are a wholesale-funded bank would probably have been true two-three years ago. The diversity of our deposits has improved significantly over the last three years, as we grew our retail franchise. More than 86 per cent of deposits are from depositors contributing less than 0.2 per cent of total deposit base individually," said Jaideep Iyer, group president (financial management).
He added the RBI measures appeared to be temporary - for three or four months - and aimed at curbing volatility in the rupee's exchange rate. Even if RBI continues with these steps for a longer period, YES Bank could increase its lending rate to offset the impact of high borrowing costs.
"There has been an overreaction in money markets in the aftermath of RBI's recently announced measures to stabilise the rupee. While the knee-jerk response has resulted in hardening of rates, I believe the full impact of these measures would eventually assuage sentiment and restore normalcy in money markets," Rana Kapoor, co-founder, managing director and chief executive, said in a statement.
On Monday, RBI had decided to cap the daily liquidity adjustment facility at Rs 75,000 crore, increase the marginal standing facility rate to 10.25 per cent and sell government bonds worth Rs 12,000 crore through open market operations. The moves resulted in a rise in bond yields and money market rates.
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Several analysts had cautioned investors YES Bank would be among those hit the hardest by RBI's moves, as it relied more on short-term wholesale funding, for which rates had risen. The bank stock has fallen 15.5 per cent since its intra-day high on Monday. On Wednesday, the stock ended at Rs 424 on the National Stock Exchange, down 5.98 per cent from Tuesday's close.
YES Bank, however, played down the concern. "The concept that we are a wholesale-funded bank would probably have been true two-three years ago. The diversity of our deposits has improved significantly over the last three years, as we grew our retail franchise. More than 86 per cent of deposits are from depositors contributing less than 0.2 per cent of total deposit base individually," said Jaideep Iyer, group president (financial management).
He added the RBI measures appeared to be temporary - for three or four months - and aimed at curbing volatility in the rupee's exchange rate. Even if RBI continues with these steps for a longer period, YES Bank could increase its lending rate to offset the impact of high borrowing costs.