YES Bank to transform into a retail bank: Administrator Prashant Kumar

Hopeful that moratorium on withdrawal will be lifted by Friday, says bank administrator

Prashant Kumar, the new man in charge of YES Bank, has chalked out the strategy of the beleaguered bank, which includes selling down part of its vast portfolio of corporate loans, and focusing on retail banking — the mainstay of its highly profitable rivals.

The focus on retail banking is the opposite of what the management led by Rana Kapoor had focused on, and which led to the accumulation of a huge amount of bad debt in its corporate loan portfolio. This had resulted in the ouster of the board by the Reserve Bank of India (RBI) last week, and a moratorium was placed on withdrawals of deposits above Rs 50,000. According to an estimate by JP Morgan, the bad loans in the bank could go as high as an additional Rs 45,000 crore.

In an interaction with Business Standard on Monday, 59-year-old Kumar said the queues at bank branches and ATMs were thinning after State Bank of India (SBI) and the RBI offered support to maintain liquidity at India’s fourth-largest private bank. “We are hopeful that by Friday we will be able to lift the moratorium on withdrawals. We are also thankful to our customers for standing by us,” said Kumar, who was appointed the bank’s administrator by the RBI.

“We are banking on three things to instill confidence in customers. First, SBI is investing up to 49 per cent of the bank’s equity, which is a big thing. Second is the speed of resolution, which is moving very fast with support from the RBI and SBI. Finally, the bank is firming up capital-raising plans and will announce these soon,” he said.  

The bank will come out with its financial numbers for the December quarter by March 14, as announced earlier, Kumar said.

“The RBI is in the process of appointing a new board and our strategy to convert into a full-fledged retail bank will then be placed before this new board,” said Kumar.

The officials posted in the corporate loan portfolio will be asked to focus on recovering old loans instead of disbursing new ones, he said.
 

The bank will have to be predominantly retail (assets), the share of which should be 60-70 per cent. At present, the share of retail in the loan book is around 30-35 per cent and the rest is corporate. We need to reverse this, Kumar said.

Kumar added that it was very important for the bank to demonstrate that it would be able to meet its customers’ withdrawal demands. “If we are able to show on the first day that we will meet all the withdrawals, it will be a demonstration of our intention that all customers’ deposits are safe.”

This bank has very good customer connect and our teams are reaching out to tell them we are ready to meet their demands, Kumar said.

On various UPIs (unified payments interface), which are unable to transact business because of the moratorium, Kumar said those using YES Bank’s back end will be able to transact as early as Friday, when the moratorium is expected to be lifted.

“All the systems and technology are in place. Let me assure all customers that there is nothing to worry,” Kumar said.

The administrator said several customers who were unable to repay loan installments to other banks will be given certificates by YES Bank about the RBI’s plans, so that those banks take the moratorium into consideration and don’t penalise customers.

When asked about the quantum of withdrawals of deposits in the past few months, Kumar did not provide any figures, but said all numbers would be provided on March 14.