Yes Bank Falls After Raising Rates for First Time in Two YearsAnto Antony
Yes Bank Ltd., the Indian lender with the lowest bad debt ratio, plunged in Mumbai trading after a cash crunch prompted it to raise lending rates for the first time in almost two years.
Yes Bank shares declined 9.2 percent to 316.55 rupees as of 1:38 p.m. in Mumbai, headed for the lowest close since May 2012. The stock was the worst performer on the S&P BSE Bankex index, a gauge for 13 banks, which fell 2.7 percent.
The lender raised its base rate by 25 basis points to 10.75 percent and deposit rates by as much as 50 basis points with effect from Aug. 1, according to an e-mailed statement today. Yes Bank’s move to raise interest rates, the first lender to increase borrowing costs since the Reserve Bank of India tightened liquidity to support the rupee, will slow credit growth at the company, according to Hatim Broachwala, an analyst with Karvy Stock Broking Ltd.
“Increase in lending and deposit rates suggests that Yes Bank expects the tight liquidity scenario to continue for some time,” said Mumbai-based Broachwala. “Investors see this as a drag on loan growth and profitability.”
The central bank raised two interest rates this month and capped banks’ access to funds under the liquidity adjustment facility to halt a slide in the rupee, which plunged to a record low of 61.2125 a dollar on July 8.
Yes Bank will maintain its net interest margin, a gauge of lending profitability, above 3 percent, Chief Executive Officer Rana Kapoor said earlier this month. The Mumbai-based company reported a net bad loan ratio of 0.03 percent as of June 30.