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Fixing accountability, addressing NPAs, growing deposits: Prashant Kumar on YES Bank revival

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Prashant Kumar, CEO and MD of YES Bank, was entrusted the most challenging banking job in India on March 5, 2020: to stabilise a bank that the Reserve Bank of India had just then saved from the brink of collapse. And now, 10 months later, Prashant Kumar tells Furquan Moharkan of DH what has changed at the Bank since, and what is the road ahead. Edited excerpts:

How is the process of stabilising the ship coming along?

We have come a long way. We have been able to win back the confidence of the customers — so, deposits are continuously growing. And on the Current Account – Savings Account (CASA) side, we have added 85,000 new customers in the last month (2.25 lakh customers during the quarter). For the first time, the CASA ratio has improved, which is now at 26% — and we are moving towards our target of 40%. In another 12 to 18 months, we would be reaching that target.

What are the focus areas for you in the revival of the bank?

The first focus area is growing the deposit side. The second is addressing the large pool of non-performing assets (NPAs). So, our strategy is to have a very focussed approach towards the resolution of the NPAs — which has worked out very well. We have made a cash recovery of Rs 5,000 crore in the last nine months, and we are moving towards our target of Rs 5,000 crore of cash recovery by the year-end. That means we have to recover another Rs 2,000 crore in this quarter.

What is the focussed resolution approach that you talked about?

First, we have created a separate vertical to deal with the recovery. Earlier, the people who were in charge of sanctioning loans were also doing the resolution — which is a conflict of interest. And this vertical, made up of around 100 people, is directly reporting to me. So, on a case to case basis, we are trying to find what would be the right strategy for the resolution of bad debt.

Deposits have been sequentially growing. But this growth has been of an arithmetic nature, while impairment was of the geometric nature. When do you see them reach peak levels?

The figure of deposits we saw in the March 2019 quarter would be reached somewhere by March 2022. And there is a reason for that. In March 2019, almost Rs 50,000 crore worth of deposits were from government accounts, which has, right now, come down to almost Rs 9,000 crore. Some of the state governments had taken a call not to place deposits with the private lenders because of the problems we have seen in private space. On the retail side, it takes time to grow. But it would be a better mix of deposits going forth.

The bank seems to be fairing well in terms of capital available. Then why is there a need to raise a further Rs 10,000 crore?

There is no need to raise capital, and we are very well capitalised. The only thing is that for any capital raise, we need to follow a process. We have just taken an enabling approval from the board. We are not going ahead with it immediately. We don’t want a situation where we have growth opportunities, and we are not able to grow only because of a lack of capital.

What do you have to say to 1.6 million retail investors who are still sitting on huge losses?

It is very important that the bank stabilises — and that is exactly what we are doing. And I think when the bank starts doing well, then the investors would also get the returns on their investment.

Former management never initiated an internal inquiry into malpractices at the bank by one of the former co-founders. Are you internally looking into what and where did the bank go wrong?

There are two aspects to it. One, whenever the loans become bad, we always fix up the staff responsibility — that we are doing. Secondly, wherever we are finding criminal involvement of anybody, we go to the external agency. 

There were some high profile transfers that happened at the bank immediately after the bailout. Were they part of the clean-up exercise?

After the moratorium was lifted, we have gone about the re-organisation, and then the people were moved as per the requirements of the business.

Risk metrics were sent for a toss by the former management. How are you setting the things right?

Earlier, credit underwriting was coming under the risk division — which is a conflict of interest. We have segregated that — now, we have a separate chief credit officer and chief risk officer. And the risk officer directly reports to the board. The credit officer operates within the risk framework. Earlier, MD and CEO was heading the committee to take credit decisions — by which he would be able to influence the decisions. Now, MD and CEO isn’t part of the credit decision process.

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