On Wednesday morning, Yes Bank Ltd. flooded the front pages of India’s leading newspapers.
“YES, our services were interrupted...
YES, you were inconvenienced....
YES, this was a temporary pause....
We start a new journey, backed by India’s best.”
With that message, Yes Bank started down the long road to win back the confidence of depositors, who have seen a part of their funds locked in due to financial stress at the bank.
The moratorium on India’s fourth largest private lender was imposed on March 5. A flight of deposits and mounting bad loans prompted the Reserve Bank of India to seize control of the lender, place it under a moratorium, and piece together a rescue plan led by State Bank of India.
With that plan in place, the restrictions placed on deposit withdrawals lifts at 6:00 p.m. on Wednesday, March 18.
The new management, analysts and stakeholders are all watching closely to see whether customers rush to withdraw funds when restrictions are lifted.
Ahead of the bank being put under moratorium, the bank lost a third of its deposit base in a six-month period. Deposits dropped from Rs 2.09 lakh crore in September to Rs 1.37 lakh crore as of March 5. During the moratorium, a third of depositors withdrew the maximum permitted amount, Prashant Kumar, the current administrator and chief executive officer-designate at Yes Bank, said in a press conference on Tuesday.
Also Read: Yes Bank Reports Rs 18,564 Crore Loss In The Third Quarter
Kumar assured that the bank is fully prepared to meet any withdrawals and that branches and automated teller machines are stocked with cash. If the bank needs any further liquidity support, its largest investor State Bank of India and the RBI have assured support, he said.
The CEO-designate is, however, confident that customers won’t move out.
But Yes Bank’s return to stability and its campaign to regain customer trust will be an uphill task, experts say.
How To Save Yes Bank Brand
Yes Bank’s first step toward addressing the trust deficit has been weak, according to independent communications consultant Karthik Srinivasan. In the advertisements on Wednesday, the bank’s messaging did not have any humility and it tried to almost whitewash the issues.
“What could have helped is a more credible action plan detailed in these newspaper ads and some level of reflection on the events which have transpired recently. If the bank were able to do that, people could trust it better,” Srinivasan said. “But here, at great marketing cost, the bank has only tried to downplay the difficulties customers have faced.”
According to management consultant and brand expert Harish Bijoor, Yes Bank’s brand image has taken a significant hit. For any company, especially banks, regaining trust requires focused work and investments. This cannot be achieved through celebrity endorsements, which is what banks typically do, he said.
“The bank should consider using a one-to-one method of rebuilding trust. It is the hard way because it is a long-term process, but ensuring that local branch employees talk to customers in localities around the branch and ensure that they are given enough comfort will help,” Bijoor said.
Along with its newspaper advertisements, Yes Bank did send out mailers to individual customers repeating the message that it is back.
There are three types of customers Yes Bank will have to deal with and its strategy will have to be tailored differently for each of them, Bijoor explained.
The first type are those who has never heard of the bank or its problems. For these customers, the approach could include a light touch model, where the benefits of a Yes Bank account are explained. The second type includes customers who have heard about Yes Bank but have never banked with the lender. For this type of customers, the bank may have to look at special offers and benefits to attract them to open an account or use any other services.
“The third type is the most difficult. This includes customers who have been affected by the recent moratorium. To regain their trust, the bank may have to let them use its services freely without giving them any difficulty. If they want to withdraw their funds, the bank should let them,” he said. “This will work in the bank’s favour as customers are assured that their money can be accessed when they want it.”
Also Read: Yes Bank’s New Investors Sitting On Windfall Even Before Shares Are Issued
Lessons From The Past
Yes Bank is not the first lender to fight a crisis of confidence.
In June 2007, UTI Bank was renamed Axis Bank to help the bank make a clean break from the United Trust of India brand, which had faced its fair share of turbulence.
According to a former Axis Bank executive who was part of the team transitioning the lender away from the UTI tag, the name change proved to be a double-edged sword. Some customers thought the name change signaled the loss of support from UTI, which, in the early 2000s, was a behemoth, the person said on the condition of anonymity.
The bank lost some deposits, as a result. To counter this, Axis Bank engaged with individual customers and small businesses at branches to explain that UTI’s support was still there and that their funds were safe.
Also Read: Yes Bank Rescue: Echoes Of The 1998 LTCM Bailout
As far as large corporate or government entities are concerned, there is nothing that Yes Bank needs to fear, another former senior Axis Bank official said. Since customers can see that the government and the RBI are backing the bank’s rescue, they may not shift deposits, this person said, speaking on the condition of anonymity.
Moreover, RBI Deputy Governor NS Vishwanathan recently wrote to state governments, assuring them about the safety of their deposits in private banks after some large withdrawals at RBL Bank Ltd. and IndusInd Bank Ltd. Such communications help in restoring confidence, the person quoted earlier said.
Another important customer acquisition tool that Yes Bank can use is its higher savings account deposit rate, the second official said. Currently, Yes Bank offers 6-6.25 percent interest on savings account deposits worth Rs 1 lakh and above. This is higher than the 3 percent that SBI offers and the 4 percent offered by most other banks.
Also Read: In The End, It Took A Whole Village To Rescue Yes Bank
Rates, however, may not be enough, particularly to reassure existing retail depositors. “The approach has to be bottom-up, because people generally do not trust a top-down approach,” Bijoor said.
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