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Informist, Saturday, Jan. 25, 2025

NEW DELHI – YES Bank expects its net interest margin to improve by 80-100 basis points over the next two to three years as the cumulative impact of multiple efforts take effect. Speaking to reporters on Saturday after declaring earnings for Oct-Dec, which showed the net profit was up 164.5% on year at INR 6.12 billion on drop in provisions, the bank said the December quarter was crucial from the perspective of margins.

"From a margins standpoint, it was an important quarter of inflection as it marks the beginning of meaningful reduction in our outstanding RIDF deposit balances, which reduced by over INR 80 billion largely towards the second half of December," Managing Director and Chief Executive Officer Prashant Kumar said.

The Rural Infrastructure Development Fund, or RIDF, is maintained by the National Bank for Agriculture and Rural Development. Commercial banks must contribute to it to the extent they miss their priority sector lending targets. The returns on the balances in this fund is lower than what banks can otherwise get.

According to Kumar, YES Bank's Rural Infrastructure Development Fund deposits have fallen to 8% of its total assets from around 11% over the last few quarters. "Going forward, while we may continue to see some RIDF related fall, majorly for prior period to FY24, but on the net absolute basis the bank looks to be well on course to reduce the same well below 5% over the next 2-3 years," he added.

The bank stepping up its retail lending will also help the NIM, which was flat year-on-year as well as sequentially in Oct-Dec at 2.4%. YES Bank is currently in the process of recalibrating its retail portfolio, with a focus on improving profitability. As a result, retail advances were down 3.2% on year as on Dec. 31. Within the overall retail book, personal loans were down 12.2% on year, while commercial vehicle and auto loans were 9.0% and 23.3% lower as at the end of December. Of YES Bank's gross slippages of INR 13.48 billion in Oct-Dec, retail fresh slippages were INR 11.74 billion, unchanged from Jul-Sept. According to the bank's management, as the retail business picks up, which is now "getting into a state of readiness", it would reflect positively in the margins.

The third driving force for the margin will be continued control over the cost of funds. The bank pointed out that despite the ongoing tight liquidity in the system, it had managed to maintain its cost of deposits at 6.1% over the last one year and has been one of the few banks to grow its current account, savings account ratio, which rose to 33.1% as on Dec. 31 from 32.0% at the end of September and 29.7% a year ago.

On the asset quality front, Kumar said YES Bank is on track to meet the guidance of recoveries and upgradations in 2024-25 (Apr-Mar) being more than INR 50 billion, with the figure for Apr-Dec standing at INR 44.43 billion. Shares of YES Bank on Friday closed 1.25% lower at INR 18.24 on the National Stock Exchange.  End

Reported by Siddharth Upasani

Edited by Ashish Shirke

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