See FY16 credit cost at 70 bps; exposures assured: Yes Bank

Yes Bank has lowered its credit cost guidance to 50-70 basis points (bps) from the earlier 60-80 bps for this fiscal.Talking about the bank’s sectoral exposure, Rajat Monga CFO, YES Bank says: “We have 2.7 percent exposure to steel sector against the 3.3 percent in March.” With gross non-performing assets (NPAs) rising 0.46 percent and net non-performing assets up 0.13 percent, he says “As Yes Bank, we have to be assured ourselves that we are financing the right asset which has a good value and has operating cash flow sort of safety net.”Speaking to CNBC-TV18, Monga says the bank has restructured two borrower's accounts in the road sector for the quarter, totalling to about 20-21 bps on the banks' loan book. “These restructurings are on account of delay in commencement of these toll roads; again not a financial distress restructuring, it is more a timing challenge where the commencement of the road and therefore tolling has got postponed while the debt servicing had begun to come due,” he adds.Below is the transcript of Rajat Monga's interview with CNBC-TV18's Ritu Singh.Q: What was the gross amount of restructuring that you did in Q1 and which sectors did it come from? Have any of these restructured accounts slipped into NPAs because that has been a worry with a lot of banks that have reported numbers in Q1?A: We have restructured two borrower accounts in the road sector in the current quarter, totalling to about 20 basis points or 21 basis points on the banks loan book. These restructurings are on account of delay in commencement of these toll roads. Again not a financial distress restructuring, it is more a timing challenge where the commencement of the road and therefore tolling has got postponed while the debt servicing had begun to come due. So, we have restructured the dent servicing to allow the commencement of tolling. It could be that these couple of accounts could very well be standard in the next 6-9 months time as their projects come on-stream.We have seen on the other hand no migration from the past restructured book to the current NPA book. So, the restructured loans that we are holding including these two loans are also in the carved out, merited category which RBI has created when they changed the restructuring guidelines. So, this is not even 5/25. This is projects which get delayed because of the initially planned commencement dates and are permitted to be routinely restructured.Q: So we understand there was no 5/25 restructuring from the bank this quarter but as far as Non-Performing Loans (NPLs) are concerned both gross as well as net Non-Performing Assets (NPAs) have seen some uptick both sequentially as well as over last year. So, what is your sense going forward? Will NPLs be coming down any time soon? I am asking you this because there are specially some concern about steel and power sector accounts turning into NPAs because of their bad financial health. So how is Yes Bank preparing for this?A: The uptick in NPAs that you are noting is actually very marginal. If you convert that into crores of rupees it is not very consequential. While there has been a small uptick in these numbers the overall numbers continue to be possibly industry lowest. So, the position as at basis is very healthy if I may say. The point on the exposures to steel and power sector I will have to give you some data from the Yes Bank stand point. We have 2.7 percent exposure to steel sector. We had last reported this exposure in March at 3.3 percent. So, our steel sector exposure actually has come down and that was also possible because of another factor that we had reported when we had reported our March details was that the rather to steel sector of Yes Bank was two thirds AA rated or better.Q: I want to ask you specifically about Jaiprakash Associates which was in the news recently for a possible delay in loan repayment. So, what is the exposure that Yes Bank has and are you also facing some stress on that particular account even for the JP Group if you could tell us?A: I will not be able to discuss individual exposures and borrowers or the specific structures but I can say that there is a method in the banks in terms of lending that the bank is doing. If there is stress in any certain name, if you believe there is stress it does not mean that there is stress everywhere in that group or in that name. There will be assets in that group which are good and bankers need not worry about. So, as Yes Bank even if we are financing any of these situations we have to be assured ourselves that we are financing the right asset which has a good value and has operating cash flow sort of safety net. So, we are assured of our exposures. When we look at them and we look at these exposures on a routine basis that does not necessarily alarm us in terms of the outcomes.We are looking at a 60-80 bps credit cost for the current year that is what we projected at the beginning of the year. We have had a first quarter which has been lower than that trajectory. So, in fact we are lowering our guidance for the full year to 50-70 bps from the earlier 60-80 bps.