New investor should have a say in Yes Bank CEO succession plan: MD & CEO

Our commercial banking portfolio has grown well, says Prashant Kumar

Private lender Yes Bank’s net profit jumped 59 per cent year-on-year (Y-o-Y) to ₹801 crore in Q1FY26, driven by a solid rise in both net interest income and non-interest income. Yes Bank Managing Director and Chief Executive Officer Prashant Kumar spoke to Subrata Panda in an interview in Mumbai on the bank’s growth plans, succession planning, and capital raising plans. Edited excerpts:

 

The bank’s loan growth in Q1 was lower than its peers and the industry. What’s your view?

 

We have taken a very strategic call to grow only in those segments which are profitable. We have said earlier that we would be looking for profitable growth. On the retail side, we grew by 0.3 per cent in Q1. But within retail, we have retail assets and the microenterprise business (MIB) that has grown by 11-12 per cent. But there was slight de-growth in the retail assets because we are not there in the two large components in retail assets – prime home loans and new car loans — as these segments do not make money for us. Our commercial banking portfolio has grown well. In the large corporate segment, we grew by just 3 per cent because, due to the reduction in the rate of interest, the corporates were demanding very thin pricing. We would not like to do those kinds of deals where you do not make money. This is the reason why we grew lower than the industry, but otherwise also Q1 is typically a slow quarter.

 

Do you stick to your guidance of 10-12 per cent loan growth in FY26?

 

Yes, absolutely. I do not read too much into the Q1 numbers. We are quite hopeful we would be able to grow in that range. 

 

Where do you see that growth coming from in the next few quarters?

 

The commercial banking segment would continue to grow for us. MIB, which is a part of retail, will grow in the range of 20 per cent. And retail assets also, we would gradually grow, and the moment retail asset growth touches 10 per cent, our overall growth would be around 10-12 per cent. We are cautious on unsecured retail. Our credit card book is growing, but we are again cautious on personal loans. Also, gradually, we are seeing delinquencies come down.

 

Would you say your loan growth target is on the conservative side?

 

No, I think if we decided to grow in the prime home loan and car loan segments, we would have 15 per cent growth. But that does not make sense for us. For us, the important part is profitable growth. So, the products which are secured and give a good yield, we are going there.

 

What is your strategy on the wholesale book?

 

Wholesale we are looking at not only from the lending perspective but also from the viewpoint of transaction banking. If you are 10 per cent of their working capital requirement, you can be a transaction banker. The moment you are a transaction banker, you have the floats and the fee income. We are looking more in terms of how we can get the other income from the corporates, not only from the lending side. We have a lot of opportunities on the trade finance side as well. So, that is why, if you see our corporate book, we continue to reduce our risk-weighted assets. It means we are with a good-rated customer, good current accounts, good fee income. And risk-weighted assets are lower. So, we have better return on assets (RoAs).

 

The board only sought a six-month extension for you from RBI. What was the rationale behind this decision?

 

Transition is around the corner. The new investor would join the group in some time. There was a thought process that since a new investor with 20 per cent stake is coming, they should be given an opportunity to have a say in the succession. I think that is a very fair deal. And that is why we asked for a six-month extension, expecting that this deal would conclude by September. And then the board collectively can make the recommendation to the RBI.

 

Would you be in the fray to lead the bank even after the new investors join the bank?

 

No, it is not a question of whether I am in the fray. Collectively the board will decide with new investors what is going to be good for the bank.

 

There were reports that the board has started searching for a new CEO, but now they have paused the search…

The real picture is, the board has an obligation to comply with the process for succession planning. But when you know that new investors are going to come, let the new investor come and then collectively they can decide. 

 

Once the deal fructifies, do you think SBI will sell its remaining stake in the bank?

 

SBI will have a remaining 11 per cent stake in the bank. So, there is no compulsion for them to sell that. They will be below 15 per cent. According to regulation, the only requirement is you have to be below 15 per cent.

 

Overall, the credit growth scenario looks grim, with retail slowing and wholesale not picking up. When do you see the scenario improving?

 

Whenever certain actions are taken, the results come after a certain time. The economy is doing well. The monsoon has been extremely good. Government investment continues to help. I think with the festival season starting from the end of the second quarter, we are expecting demand to come from all sectors.

 

How do you see the bank’s net interest margin (NIM) trajectory going forward?

 

A rate cut of the first 50 basis points (bps) has been passed on. But the rate cut of the second 50 bps has to be passed on by the entire banking industry over a period of three months. The entire book, which is linked to your external benchmark, would be revised. So, we will see an impact on the NIMs. For the entire banking industry, NIM compression in Q2FY26 will be the hardest. Fortunately, in Q1, we have been able to protect our NIMs. We will try our best in terms of protecting NIMs in Q2, but it will be a big challenge. I think from Q3, everybody would see a slight improvement in NIMs due to the CRR cut. And Q4 will definitely be much better. 

 

Deposit growth was also slow. How do you see that?

 

Deposit growth from retail has been extremely good at 20 per cent. Then what is the second alternative? You go to the corporates and take the term deposits, which are costly. We were maintaining that credit-to-deposit (CD) ratio between 85 and 90, which is good from the profitability point of view. So, our aim is always to see that we grow the deposit in line with the loan growth. But branch banking deposit growth of 20 per cent is something which we would continue to grow.

 

The bank took board approval to raise ₹16,000 crore. Are you looking to tap the market to raise funds soon?

 

With a 14 per cent CET, we do not need to raise capital. This was more of an enabling approval. Tier II is something that we would be definitely exploring. But we are looking for a better opportunity because we have already got one rating upgrade AA-. I think, if AA- moves to AA, the pricing on the bonds would come down. We would look for these kinds of opportunities when we have a rating upgrade and we are able to raise tier II bonds.