May need to reverse Rs 800 cr in interest income: YES Bank's Prashant Kumar

A back-of-the-envelope calculation says interest reversal will be to the tune of Rs 700-800 crore in that particular quarter, says Kumar

YES Bank will soon complete a year after the RBI-driven restructuring. While balance sheet is stabilising, Prashant Kumar, managing director and chief executive, tells Subrata Panda & Abhijit Lele that the bank will need to reverse interest income when the Supreme Court lifts the stay on treating loans as non-performing assets (NPAs). Edited excerpts:

After improving net interest margin (NIM) in Q3FY21, the bank has guided for a likely fall when the Supreme Court verdict on asset quality issue comes in. What will be the extent of the impact on NIMs?

Once the SC verdict comes, you have to reverse the entire interest of impacted accounts. So, that quarter will be an exception. Today, our NIM is 3.4 per cent because there is some recovery from stressed assets that have been added to the interest quotient. But this will not happen every quarter.

A back-of-the-envelope calculation says interest reversal will be to the tune of Rs 700-800 crore in that particular quarter.

You were aiming to recover Rs 5,000 crore in FY21. Will you be able to achieve that target? 

Certain resolutions are in the process. It can be a touch-and-go situation. It is possible that our recoveries for FY21 will be Rs 4,500 crore.

The bank seems to have finalised a work-from-home (WFH) policy and 30 per cent of employees are working from home. How much are you going to save on rentals?

We were occupying 12 floors at the headquarters. Of the 12, two floors have been vacated. We will be able to vacate another couple of floors in the next six months. Each floor cost around Rs 10 crore per annum. 

The WFH policy is only for the back-office and corporate office, not for branches. Hence, it will be in Mumbai and Delhi. We are trying to bring in Chennai in this policy. 

It is not that 30 per cent of our staff will permanently WFH. They will need to come to the office, but the frequency will vary. We are going with an open work station policy and there will be no earmarked places for a person.

At the start of the reconstruction process, the bank gave an assurance that there will be no job losses at least for a year. Will the assurance continue? And, are you hiring?

In the past three months, we have hired 600 people. So, if we are hiring, we will definitely not ask anyone to leave. 

Our employees have contributed to reconstruction. In terms of increment, we are working on that. 

It’s going to be a year since YES Bank was put under moratorium and new investors came on board to rescue the bank. What is your assessment of the situation at present?

There are three things. The first part was stabilising operations, and that has been done. The second part was the impact of the pandemic on the loan book. The way the economy is improving, it will have a positive impact on that part. So, this will take 6-12 months. The third part was the legacy NPA book. How much and how fast we can recover? So, operations have been stabilised, and recovery process we are all undertaking.

You had set out to make the bank more retail-oriented. How far have you come?

Our goal for FY21 was that corporate and retail+MSME will be in the ratio of 50:50. We will be achieving the target. In Q3 itself, retail contribution improved from 24 per cent to 28 per cent. The ratio would be 60:40 by FY22.

Is there a conscious effort to not expand the corporate book or is there no demand for credit on the corporate side?

It’s a mix of both. The demand is not there from the corporate side and, with a balance sheet of this size, taking very large exposures does not make sense. For some time, we will continue with this strategy. Maybe when the balance sheet gets stronger, we will take a call on very large exposures. But we continue to lend to corporate houses and we have disbursed Rs 2,000 crore. But we have disbursed Rs 12,000 crore to retail and MSME.

Are you seeing any stress in the retail portfolio?

It depends on which particular products on the retail side you are expanding. Hence, if you are careful in terms of selection of the products and customers, I don’t think there will be an issue. We are not in the unsecured retail side.

What are the steps that need to be taken to take the bank ahead?

  

The strategy is not going to change. We are moving in the right direction and, despite Covid-19, we are achieving FY21 goals. We are reaching a credit-deposit ratio of 100 per cent, recovery of Rs 5,000 crore, and keeping our net NPAs below 6 per cent.

Is it safe to say you will try to keep net NPA below 3 per cent?

That would be very ambitious. While today the bank has net NPAs of 4 per cent, after the SC verdict, gross NPAs would go up and you cannot make so much provisions to take it to around 3 per cent. Our target is to keep it below 6 per cent even after the SC verdict.