Feb 27, 2013, 04.27 PM IST | Source: CNBC-TV18

Banking licence: Consolidation to take time, says Yes Bank

Rana Kapoor, Founder & CEO of Yes Bank believes there are diverse opportunities in the banking and financial landscape of our country and therefore, the new banking licenses must set up differentiated business models to cater to under-served areas.

Given the opportunity to diversify the banking and financial landscape in our country, new bank licensing will have to have differentiated business and financial models

Rana Kapoor

Founder, CEO

Yes Bank

The Reserve Bank of India (RBI) has come out with the much awaited norms for new banking licenses . Entities from both the private and public sector shall be eligible to set up a bank through a wholly-owned non-operative financial holding company (NOFHC), according to the new guidelines.

Rana Kapoor, Founder & CEO of Yes Bank believes there are diverse opportunities in the banking and financial landscape of our country and therefore, the new banking licenses must set up differentiated business models to cater to under-served areas. Besides, he also feels that consolidation within banking is likely to take time.

Kapoor further added that despite strong growth, their market share is still constrained and they would continue to adopt a cautious stance in 2013-14. Yes Bank’s retail operations have been revamped and it is likely to improve their revenue, informed the CEO. Moreover, Kapoor expects FDI to help contain the current account deficit. 

Here is the edited transcript of the interview on CNBC-TV18.

Q: How do you think the new bank licences will pan out? Do you think this time around if people with deep pockets are going to get the licences you are going to see more merger and acquisition (M&A) activity than we saw up until now?

A: My sense is that, given the opportunity to diversify the banking and financial landscape in our country, new bank licensing will have to have differentiated business and financial models. These, in all probabilities, will have to hover around financial inclusion in underbanked and unbanked areas.

My sense is that, with India’s overall under penetration in banking, a large part of the population is under served and more than 50 percent is financially excluded. Hence, new banks will have to create differentiation, to be somewhat creative.

Q: Will they be profitable? You would know better than anyone else that lending from tier III to tier VI cities will actually be a social responsibility than being a commercially viable option?

A: I think in the long haul it is also an opportunity, if there is application of newer technologies, if there is an outreach because the reach and depth of Indian banking needs to widen and deepen. New bank models will have to focus on that.

On the question of profitability, with the good mix of metro urban and the opportunity in rural banking, my sense is that models will take a while to become profitable but, at the same time India is a great opportunity.

If one looks at the M&A question, personally I believe there is a school of thought in India which thinks the systemic risk of our country's banking is lower given the fact that we have medium and small size banks. Therefore, we are less prone to the risk or the risk of inter-connectedness. I personally believe that consolidation is a little bit of a myth and it will take time. There may be an opportunistic play.

Yes Bank stock price

On April 17, 2014, Yes Bank closed at Rs 416.90, up Rs 9.15, or 2.24 percent. The 52-week high of the share was Rs 547.15 and the 52-week low was Rs 216.10.


The company's trailing 12-month (TTM) EPS was at Rs 42.96 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 9.7. The latest book value of the company is Rs 161.05 per share. At current value, the price-to-book value of the company is 2.59.

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