Money & Banking

YES Bank will be back on growth track in two quarters: Administrator Prashant Kumar

Surabhi K Ramkumar Mumbai | Updated on March 10, 2020

Prashant Kumar, RBI-appointed administrator of YES Bank   -  THE HINDU

The lender’s problems lie mainly on the corporate side; retail portfolio is very strong, says Prashant Kumar

It may be an unusual and challenging situation but Prashant Kumar, the RBI-appointed administrator of YES Bank, is optimistic that normalcy will be soon restored at the private sector lender. In an interview with BusinessLine, he said the troubled private sector lender can be back on the growth track in two quarters, and that the main problems are on the corporate side due to concentration of risk. Excerpts:

In your assessment, what went wrong with the bank?

Whatever problem happened was mainly on the corporate side; on the retail side they are very strong. For small entities, there is a fundamental principle of risk diversification. In larger entities, even if the risk is concentrated, it can be taken care of by other parts of the balance-sheet. This entity is not very large. More than 60 per cent of the loans were on the corporate side. And either some loans were given to entities where they should not have been given or unfortunately the entities to whom the loans were given were not performing. This was not only for YES Bank but other banks also. But if these are NPAs for other banks, they can take care of them because they (banks) are large. For YES Bank, these accounts had become magnified. So risk diversification is very fundamental for banks. Anybody who doesn’t follow risk diversification would land in trouble — even a very large bank. This is something which was missing. I am not saying that all decisions were wrong. They gave loans to Vodafone, Jet Airways, ADAG, DHFL — everybody gave loans to these entities. The allegations are a separate issue but when the loans were given, all the entities were AAA rated. The issue is about concentration. Even if one account fails, the bank should be able to take care of it.

As an administrator, what have you suggested to de-risk the portfolio?

As an administrator, my role is more immediate. This (de-risking the portfolio) will vest with the board and the MD and CEO. The board will take a call on the future strategy.

Where do you see the bank in the long run?

My assessment is that two quarters will be enough…The clean-up of accounts will happen by the March 31 results. Two quarters will be enough to put this bank back on a very strong growth track.

What will be the structure of the new board?

The current board is already superseded. It is the prerogative of the RBI, which will appoint the MD and CEO and the board members. It will have a minimum of six members and two nominations from State Bank of India. When the board is reconstituted, it will be based on an RBI notification and will have a term of one year. After that it will be based on the nomination process.

YES Bank had several discussions with investors earlier. What changes now?

Now everything is being done by SBI — that is the difference. We are seeing a large number of investors who want to put in money. We are trying to do it this week. The major portion of the equity will come in this week. SBI will buy a 49 per cent stake at ₹2,450 crore. The bank will be requiring much more than this; we can share the full amount required after the results.

How do you prevent the run on deposits and improve employee morale?

The first thing I did when I joined on March 6 was — within one hour — I sent a communication to all my customers and staff. When you start building trust, it can’t happen overnight. You need to communicate and demonstrate. So the very first day, all our ATMs were up. By the night of March 7, customers were able to withdraw from the ATMs of other banks also. So now, there is no rush of customers at our branches. SBI has come, that is a big comfort for depositors and employees. So we have been communicating our intent.

Now, if we are able to lift the moratorium by the weekend, that will be a demonstration. If such a big problem is resolved in such a short time, that is a demonstration. It shows that the government and the RBI are absolutely behind us by taking the support of SBI. I am seeing that whatever has happened, they (YES Bank) have a very good customer connect on the ground, which is missing in some of the larger banks. They are really strong on this.

Many operators who used the YES Bank platform for UPI payments have had to look for alternative partners. How will you address this issue?

They obviously have to partner with others to run their businesses. We have a relationship with them. We will again approach them to come back to us.

Published on March 10, 2020

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