Private sector lender YES Bank will continue to grow its deposits faster than lending, MD & CEO Prashant Kumar said in an interaction. He discusses credit demand post the GST rate cuts, asset quality, prospects for acquisition financing and succession plans. Edited excerpts:
Deposits continued to grow faster than assets in the second quarter. Will this strategy persist in the second half of FY26?
Our deposits grew 6.5 percent in the second quarter, but our retail and branch led deposits grew double that. Our CASA ratio (current account to savings) has continued to improve over the past six to eight quarters, at a time when the CASA ratio in the sector is declining. Our focus is on granular deposits. This means that we carefully choose cheap deposits instead of relying on expensive term deposits.
Secondly, dependence on corporate deposits is decreasing. For these reasons, our deposit costs have fallen by 20 basis points (bps) sequentially this quarter. We are continuously lowering deposit rates and focusing more on detailed, low-cost deposits. And we will continue with this strategy of growing deposits faster than progress, and we have been able to demonstrate this in the past.
Will the cost of deposits fall further? Yes, because term deposits, which require renewal, receive a lower interest rate. Deposit costs will therefore fall for all banks in the second half of the year. However, if loan demand remains robust, the deposit market will remain tight. If there remains a surplus of liquidity, banks can further reduce deposit rates.
How has the credit demand been this festival season, post the GST rate cuts?
We see demand in all sectors. On the asset side, there are three sub-segments. Firstly, there are corporate loans, where we are seeing demand rebounding after a very long time. The growth of our corporate loans amounted to more than 7 percent on a consecutive basis. Commercial banks also show good willingness to lend, and the same applies to private loans.
Whether you attribute this to the GST cut or the celebrations is uncertain, but the overall sentiment is optimistic. We are also seeing demand for secured business loans, commercial vehicle and unsecured loans. If this trend continues, the second half of FY26 will be very positive for the banks. However, prices remain very competitive on the corporate lending and commercial banking side. Good companies are very demanding and sometimes we feel that prices are not commensurate with the risk. There is currently a demand for both working capital and term loans from companies.
After receiving a rating upgrade after the SMBC deal, will the bank be able to raise money in the current fiscal?
Our CET-1 is currently around 14 percent. So from now on we don’t need any capital. This capital will allow us to support the expected double-digit credit growth in the current and next fiscal year. There is no immediate need to raise capital.
Slippages were lower in the second quarter. Do unsecured loans perform better?
In the area of unsecured personal loans and credit cards, tensions stabilized in the fourth quarter of 25, with the first quarter leveling off further. Now we’re seeing improvement in bounce rates, recovery rates and resolutions across segments. There is a noticeable change we see in unsecured loans. We are seeing better progress on credit cards than on personal loans, which are also in recovery mode. Special mention accounts are also sequentially flat.
What prospects does the bank see for acquisition financing?
There are two aspects to it. Firstly, this was a proposal that the banks had been discussing with the supervisor for a long time. This is a good business opportunity for Indian banks as such transactions can only be done by foreign banks or private credit players. We are still awaiting final guidance because acquisition financing carries its own risk.
Over-indebtedness and a mismatch between assets and liabilities can occur. So when the regulator issues final standards, it will have the right guardrails in place. Acquisition financing also requires people with other skills. We have the skills needed for project financing at our bank and we believe we have the right skills to participate in these opportunities. We are very enthusiastic about it.
A Swiss court ruled that Credit Suisse’s $20 billion write-down of AT-1 bonds was illegal. YES Bank had earlier conducted a similar exercise. Will this ruling have consequences for the bank?
A ruling by a lower court in Switzerland has no bearing on a case pending before the Supreme Court of India.
Has the bank considered final candidates for the CEO role?
This is a conversation we need to have internally and the goal should be to find out what is right for the bank. We will judge it together. I also want this bank to grow and prosper, and whatever is best for the bank, we will take action against it.
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