MC Exclusive | Yes Bank doesn't depend on large deposits anymore: Prashant Kumar

YES Bank MD & CEO Prashant Kumar

Private lender Yes Bank is not dependent on large deposits anymore, as 60 percent of its deposits are coming from the retail depositor, said the managing director and chief executive officer of the Mumbai-based lender, Prashant Kumar, in an exclusive interview with Moneycontrol on Monday, April 24.

Kumar added that a large number of depositors have shown faith and confidence and today “like that our rate of interest on the fixed deposit is not materially different from the best in class”. Edited excerpts:

Is the confidence of large depositors back?

I think we are focusing more on granular deposits. I think we are not dependent on the large deposits anymore, 60 percent of our deposits are coming from the retail depositor. Also, if we are adding like last year, we have opened more than 30 lakh new CASA (current and savings) accounts. And if you see the current run rate every month and year, the reading is currently more than 1.3 lakh new CASA deposits. So I will be saying a large number of depositors have shown faith and confidence and today our rate of interest on fixed deposits is not materially different from the best in class. Now, the difference is only 25 basis points. So if the rate of interest remains almost the same, and if you are able to open more and more deposit accounts, if you have good CASA growth in such difficult times, that shows that the confidence of depositors in the bank has come back.

Do you have any plans to acquire a microfinance institution (MFI)?

Absolutely, we would be exploring the possibility of acquiring an MFI to address our issue on the shortfall in the PSL (priority sector lending).

What is your plan to expand your retail presence?

We would be definitely expanding our branch network. (In FY23) we have opened 83 branches. And in the current financial year we would be opening, say, another 150 branches. The focus is more in terms of the identification of districts where our presence is not very meaningful. But these districts contribute a big amount of the liabilities on the loan side of the economy.

It's been over three years since you took charge. How would you describe the journey?

When I started the journey, we were almost about to collapse. So, I think if you start this journey and continue to get your market share, that gives you confidence. The second thing is that we also had a strategy that had more of a corporate focus, we thought, how can we make it more retail-focused?

Today retail is 45 percent of our loan book and retail and SME (small and medium enterprises) together is almost 59 percent. The corporate book has come down to almost, say, 27-28 percent. But whenever you go for a retailisation strategy, your profitability is impacted.

The balance sheet has become very strong. The loan growth and deposit growth both are doing very well. On the overall deposit growth number, the end of period number looks like 10-11 percent, but I think the comfort is that average deposit growth is almost 16 percent and average CASA deposit growth is 26 percent.

So if you see the year gone by where there has been a lot of struggle for deposit, we were able to grow 26 percent on CASA side and current account average growth is 30 percent plus, which is not a small number, which also gives you a benefit in terms of cost of funding.

The bank reported a net profit of Rs 202 crore in FY23, a nearly 45 percent drop. Your views? What's the outlook for the rest of the year?

No, I will look at it slightly differently. If you see our operating profit, the core operating profit, if you exclude one of gains or the investment and others, it's a 22 percent growth.

But at the same time, we have taken a conscious call that you can always do two things, you declare profits, which may not be sustainable because there will be credit cost. So I think the attempt is more in terms of continuously strengthening the balance sheet so that it becomes more sustainable. Next year, we know that ageing provisioning is only 80 basis points both on the SR (service request) and NPAs (non-performing assets).

Yes Bank’s recoveries in the last three years have been more than Rs 6,000 crore every year, and a similar thing would happen this year also. So it means my recoveries and upgradation would not only take care of my ageing provisioning requirement, but it would also take care of fresh slippage. So I think this is what we are trying to do and there will be a continuous upward movement in profitability.

Yes Bank's CASA ratio also declined by 30 basis points on a year-on-year basis. Is this a concern?

No, it's not a concern. Like I was sharing, this is the end of the period number. But if you see the average numbers—there are a lot of entities focusing more on the end of the period, we are more on the average. Average deposit growth in current accounts is 30 percent. Similarly, in current account deposits, the average growth is 26 percent. So we are not actually concerned if you see the average that is much better, which gives you profitability.

Do asset quality concerns continue to be a major overhang?

I don't think so, because if the gross NPA ratio has gone up from 2 to 2.2 (percent), that is a concern because 2 percent gross NPA I would not say is very high. So, these accounts continue to perform, they are servicing interest, and they are servicing the instalments, but because they were not able to meet certain ratios as on September 30, they have been technically downgraded to NPA.

Yes Bank has addressed initial big worries on capital with investor backing but its share price still remains under pressure. What is your take on this?

That I don't understand, I believe only in continuously delivering performance. What would happen in the market, I don't have any understanding at all. But definitely one thing I can share with you. There is an attempt from all of us in terms of continuously delivering on the performance, all regulatory expectations, and strengthening of the balance sheet instead of seeing a short-term thing, we are working long-term.

So I think I would like to give this confidence to investors and today we are having the largest retail shareholding in any entity more than Rs 50 lakh (market capitalisation). This is always a matter of satisfaction when such a large number has confidence in you.

It also gives you a responsibility to take care of their interest. I think I can just give one message that as an entity, we are working on a long-term sustainable delivery of performance, we don't want to do anything short-term, we are working with a lot of patience and I think these are those things which always add value to stakeholders.

The AT1 bonds issue remains an unsolved episode in courts. Could you give an update on the status?

We have filed an appeal in the honourable Supreme Court. The court has given or extended the stay against the decision of the Bombay High Court. The Reserve Bank of India has also filed an SLP (special leave petition) along with us in the Supreme Court.

Now, I think whenever it will be taken up for hearing, then after hearing both parties, the Supreme Court will take the right decision, but we have very strong legal opinions, we say that writing down of AT1 bonds has been done absolutely in accordance with the regulations, Basel regulations, which applies not only in India but internationally. It has been done in accordance with this.

Definitely growth in balance sheet profitability. Our return is more in terms of can we be getting that comfort, where we would be seen being very, very responsive to our customers. I think responsiveness to customers is something in which we would like to become the best in class. Apart from having the balance sheet growth, and delivering to our stakeholders in line with the best in the class.

Basically, after the 30th of March, we have not seen a single share being sold by any of these investors. So I think that gives us quite a confidence.