YES Bank is evaluating microfinance companies to acquire in order to boost its PSL (priority sector lending) portfolio and reduce the drag of legacy PSL issues, MD and CEO Prashant Kumar said.
“During Q1, the bank has bought PSL certificates amounting to ₹4,300 crore. For reducing RIDF (Rural Infrastructure Development Fund) drag, the bank continues to actively engage with select BC (banking correspondent) partners for organic growth opportunities while we simultaneously evaluate target for potential acquisition as well,” he said in the earnings call on Saturday.
While it is still evaluating microfinance entities and the entire process is taking some time, the bank has maintained the guidance of making such an acquisition in FY24, Kumar said, adding that the bank is also looking at other options such as co-lending and portfolio buyouts even as it grows the agriculture and SME loan books.
“The focus is on the rural market, we would definitely like to see much higher disbursements and a higher book on the rural side,” he said.
As of June 30, YES Bank’s entire rural portfolio qualified under granular PSL targets, whereas over 90 per cent of the SME book was PSL compliant. The rural portfolio for the bank was up 33 per cent as at the end of June, accounting for 2 per cent of retail assets. Rural disbursements for the quarter were at ₹717 crore, up 34 per cent y-o-y and 62 per cent q-o-q.
Businessline, had in June reported, that YES Bank is exploring an MFI acquisition to solve for PSL requirements, especially in the small and marginal farmers category, and growth its high-yielding unsecured book.
Kumar had then said that the bank has seen a drag of almost 40 bps on its RoA (return on assets) because of the PSL shortfall, which is required to be put in RIDF and was thus impacting profitability.