YES Bank's capital requirement for current fiscal pegged at Rs 7,500 cr

The bank's MD and CEO Prashant Kumar said the bank would not like its Common Equity Tier I (CET1) ratio to fall below 11 per cent

Private sector lender YES Bank has pegged its capital requirement at Rs 7,500 crore to support credit growth in the current financial year.

This is the requirement after keeping in mind that the capital buffer is 3 per cent above the regulatory needs.

The bank will not like its Common Equity Tier I (CET1) Ratio to fall below 11 per cent, Prashant Kumar, its managing director (MD) and chief executive, told Business Standard.

He said the CET1 ratio was comfortable at 11.2 per cent (in March 2021), despite accelerated provisioning. The bank expects to grow while maintaining comfortable capital buffers. 

Recoveries are expected to outpace potential slippages. The lender is targeting cash recoveries of about Rs 5,000 crore.

Kumar said the moment the bank starts to generate Return On Assets (RoA) of 1 per cent, internal generation will be sufficient to meet its requirements. YES Bank is working to reach an RoA of 1 per cent by FY23.

As long as the bank does not reach 1 per cent, it is going to meet capital requirements by using reserves. Its 

RoA was -5.7 per cent as of March 31, 2021.

The bank's capital adequacy ratio stood at 17.5 per cent at the end of March 2021. It was 19.6 per cent in December 2020. The current capital base is adequate to support business growth in FY22, Kumar said.

The bank, once controlled by Rana Kapoor, was restructured under a rescue package wherein a group of Indian lenders led by State Bank of India pumped in equity capital. 

In the second round, the lender raised Rs 15,000 crore equity capital via a follow-on public offer in July 2020 to recapitalise the bank.