Reliance Infrastructure has sold its Reliance Centre at Santacruz in Mumbai to Yes Bank for Rs 1,200 crore. [Image: REUTERS/Adnan Abidi]
Yes Bank’s rescue act in early March 2020 happened in the nick of time ahead of the COVID-19 pandemic, and even a 15-day delay in it would have meant great difficulty for a lender about to close down, its new managing director and chief executive Prashant Kumar said.
Speaking for the first time about the journey since the RBI and the government moved in to bailout the lender seeing an exodus of deposits with a Rs 10,000-crore rescue act led by SBI, Kumar acknowledged that the thread was very slender and the timing was very apt.
"… if this decision had been delayed by even 15 days, I don’t know whether we would be able to see … whether we would be able to speak today," Kumar told PTI, expressing satisfaction at the way the reconstruction has panned out.
Within six days of the move to supersede the board and freeze deposit withdrawals, the WHO announced COVID-19 as a pandemic. Infections kept on increasing across India and within 20 days, the entire country was in a national lockdown.
SBI took the lead in the rescue and was supported by all the lenders in the system, who have become stakeholders in the bank by infusing capital. "We are at least very happy in terms of what we have achieved," Kumar said, listing out the 55 per cent growth in deposits, a 42 per cent jump in operating profit during pandemic-marred FY21 and a Rs 5,000 crore cash recovery as key wins.
However, the timelines of the recovery got stretched because of COVID and what should have been achieved in FY21 got deferred to the next fiscal, he said, acknowledging that the second wave is upon us now. "I think COVID is creating more issues for us. There are no regrets, but the timelines have a little elongated," he said.
He says the overall quantum of stressed assets from the legacy book has now come down to Rs 45,000 crore from the Rs 50,000 crore at the time of the bailout and includes over Rs 28,000 crore in non-performing assets and written-off loans.
Its Rs 12,000 crore slippages for FY21 are from new accounts impacted by the pandemic, and the bank would like to go for restructuring and may also lend more for their revival if the promoter get more equity, Kumar said, making it clear that it does not want to kill a business by enforcing securities straight away.
He said the bank wants the senior management personnel to have more skin in the game, and has therefore revised the compensation policies to link it to performance of the lender. Kumar said the top 250 officers of the bank will witness a dent in their take homes immediately, adding that the compensation now consists of a fixed pay, a variable pay linked to the bank’s performance and also stock options, rather than a fixed pay alone earlier.
There is a huge opportunity to grow the loan book in FY22 due to the government focus on infrastructure building, the production linked incentives scheme and a pent-up demand will revive private sector capex.
The bank, which has been largely shy of lending to corporates since the reconstruction began, will be more open to participate in such loans and has a comfort to lend till Rs 300 crore to borrowers, he said.
Kumar acknowledged that in a system flush with liquidity, loan pricing is a challenge but added that the bank will settle for select cases in the “AA and A” rated categories to meet its target of a 10 per cent growth in corporate advances.
The low net interest margin of just 1.6 per cent was attributed by Kumar to the high cases of stressed assets the bank is carrying, and he exuded confidence of the key number exceeding 3 per cent by the fourth quarter of FY22, as the bank takes care of the stressed portfolio and increases the share of retail and small business advances.
He said the bank does not see trouble with asset quality on the retail front, pointing out that its retail NPAs are less than the best in the industry because of the non-reliance on unsecured loans. Both the front-end and back-end staff have been impacted by COVID infections, Kumar said, adding that the overall number of those affected stand at 10 per cent of the 21,000 people.
The bank has taken some steps like limiting the number of those working from offices to 10-15 per cent. He said bankers need to be vaccinated on a priority basis because they have been classified as essential service providers. The bank will shift its corporate headquarters to suburban Santacruz's Reliance Centre by July, after having taken over the possession of the Anil Dhirubhai Ambani Group’s office for non-payment of loans, Kumar said.