Wednesday, March 6, 2013

Six year old bank has grown commendably

Managing Director and CEO, Yes Bank, speaks to Avneesh Singh about how the six year old bank has grown commendably over the years and looks forward to making it even bigger given the opportunities in India

B&E: What kind of growth targets are you looking for in the next five years ?

RK: We are looking forward to building 750 branches by 2015. So there will be significant investment in areas of branch banking infrastructure and human resources. Regarding the manpower, we started with 3000 plus by the end of fiscal March 2010, we are going to have around 4500 by March 2011 and our aspiration is to be at least 6000 by March 2012 and then to double that by March 2015. The most significant investment is actually into people; and the branches are going to be more or less commensurate to that. Out of the total investment, 75% is into people and 25% is into branch expansion.

B&E: What kind of impact do you foresee will the opening up of new branches have on your financials? And when do you expect them to break-even?

RK: Most of the hub branches are already together and I do not expect significant impact of the branch depreciation in totality, but we will break-even in a period of 3 to 4 months in people resources. This has the potential of tremendous incrementality on the bank’s revenues .

B&E: The NPAs are rising because the loans that were restructured in 2008 have not been paid off, especially in the textile segment and SME segment. You are more focussed on the SME segment. What will be your future strategy then?

RK: Our strategy is to go for SMEs because SMEs have been able to demonstrate (without being specific to textiles) outright resilience. SME sector, which is somewhere between 38% to 40% of the economy, was able to demonstrate resilience before, during and after the recession. The defaults were primarily in the corporate sectors. In my opinion, the much-neglected SME sector in our country needs deep commitment. It is necessary to be a versatile banker that is totally committed to the vagaries of their businesses because India is known to go through economic cycles in every 4 or 5 years . We should remember that SMEs are predicated on other businesses; so when they go down a little, one still has to be a banker to them. Amazingly, in a young bank like ours we have had negligible defaults from our clients.

B&E: You have big plans for credit growth? Will you be raising capital for the same?

RK: We had raised capital two quarters ago; so that area is relatively comfortable. There might be a need to raise capital only after a longer more time because we are simultaneously earning as well. We have earned a considerable lot and presently possess the capacity to raise all forms of capital – hybrid tier 1, upper tier 1 and upper tier 2. So technically speaking, our bank does not need to raise capital for a long time to come. We presently need hybrid forms of capital. But by March 2011, we have taken the target to raise `1500 crore from the tier 2 capital. It will be raised in tranches and this will happen in every quarter.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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