Another weekend, another crisis. The Yes Bank moratorium has hit many retail and corporate account-holders, hard. Not to speak of the wider contagion in e-payments given its 40% market share in Unified Payment Interface (UPI). While TV channels flashed visuals of thousands of hapless customers queuing up outside Yes Bank branches, what they didn’t show is thousands of frantic phone calls made by business account holders, corporate treasurers and CFOs to their relationship managers. If their monies are stuck, how do they run their businesses?
Very few businessmen, let alone individuals, in India understand the concept of Bank Risk. The possibility that a Bank whom you trust your hard-earned money with, going down; is considered to be almost Nil. However, recent events like the PMC Bank crisis in Mumbai and now Yes Bank, have shown that, once a regulator places a moratorium (for good reason to ensure the Bank doesn’t collapse), many people are suddenly left in the lurch.
A typical problem faced by many e-commerce merchants was that the payment apps powering them were unable to function as they were reliant on Yes Bank as their acquiring bank. Given the architecture of UPI, each merchant had to publish bank-specific ‘handles’ to collect money from consumers. The overnight migration happened thanks to National Payments Corporation (NPCI) allowing other banks to use the existing ‘handle’. A lesson learnt would be to delink the ‘handle’ from the acquiring or settlement bank at the backend.
From an investment perspective, the world’s major rating agencies like S&P, Fitch and Moody’s along-with their Indian arms like CRISIL, India Ratings and CARE all offer general and instrument-specific ratings for most Indian Banks. Corporate’s would do well to examine these ratings in the light of the recent events thus avoiding a ‘freeze’ in an already difficult scenario.
Anand Ramchandran Co-Founder and CFO, Kapittx