We'll grow both our liabilities & assets, but with quality: Tonse, Banodkar

Vinay Tonse, who took over as managing director and chief executive officer, Yes Bank, earlier this month says the lender will focus on growth in retail loans while keeping asset quality in mind, which will help in improving margins. In an exclusive interview with Manojit Saha, Tonse, along with group Chief Financial Officer Niranjan Banodkar, says the focus is also on how to benefit from the collaboration with SMBC, the Japanese financial major that has picked up a 25 per cent stake in the bank. Edited excerpts:

 

Based on your assessment of the bank, what are key immediate priorities?

 

Tonse: I am seeing a solid foundation. Among the priority areas, one would, of course, be growing our liabilities as well as assets. But one thing which for me is clear is that we will be growing, but with quality. The change of assignment does not change my thought process. There will be no aggression, which will bring down the quality. And when I talk about quality, it is not only on the assets, it’s also on the liabilities.

 

I’m seeing a lot of good work that has happened in a few years, particularly in the past one year. Definitely business is a top priority for us, along with profitability.

 

The second is, of course, how well we can utilise or how well we can get support from collaboration with SMBC. This is something I’m focusing on.

 

Also, the cost to income ratio has declined. This is something which we will focus on.

 

So far as loan growth is concerned, retail loans were growing in single digits. Would you like to beef up growth in retail loans?

 

Tonse: If you look at the history of this bank, it was always a sort of corporate bank. And even in the past five or six years, corporate exposure has been reduced and we have gone into retail.

 

The focus will remain more on retail. And particularly, we have a branch franchise, which is something I would like to make use of. We opened 82 branches in the past one year and the target is about 80 every year for the next few years.

 

Digitally we are strong, but we feel the physical connect with customers should be there. It somewhere gets lost in the digital. We will improve customer experience. Eventually, we will look to be a high-quality bank, a consistently profitable franchise with the best in class asset quality. Best in class asset quality, strong retail granularity, and a sustainable return ratio — these are the things we will look at.

 

Banodkar:  Growth in retail banking was in single digits for the last few quarters. But if you see the momentum here, it has only been improving. And we have always said in retail there were certain products — just using the lens of asset quality and using the lens of profitability, we had recalibrated some of the growth in these products. Over the last two or three quarters, we have been clear which products we are growing. If you now look at the disbursement run rate, it is strong. If you now see the sequential growth rate in retail banking, you look at March, when we declared that the growth rate was already at 4 per cent. This gives us the confidence that if this momentum continues, when we look at FY27, we should clearly be a double-digit growth engine, even in retail.

 

How much is the share of retail loans in the overall loan books?

 

Banodkar: Retail and wholesale loans are fairly balanced. The share of retail loans is about 46 per cent. Commercial banking is around 26 per cent. And corporate and institutional banking is about 28 per cent.

 

When do you see retail crossing 50 per cent?

 

Banodkar: The mix now is fairly balanced. We will remain in this range, 1 or 2 per cent plus or minus.

 

Yes Bank’s growth in loan books was 11 per cent FY26 while that for the banking system was 16 per cent. What are your expectations on this in FY27?

 

Banodkar:  We always said we want to target a growth rate in loans of 12-15 per cent. We do believe, now that we have solved some of the retail product recalibration, and, commercial banking and corporate banking already have strong momentum. We have every reason to believe that we should be at industry growth rates, which of course for next year could range anywhere between 13 per cent and 15 per cent. We do believe that that's the range we will want to certainly work with. We will continue to evaluate if there are better, faster ways on growth or profitability. If there are levers that are in hand, we’ll continue to continuously evaluate that. At least we want to certainly target a minimum industry, not be below industry growth rates.

 

Within retail which segments will you look to grow faster?

 

Banodkar: About two years ago, there were headwinds on asset quality. And we said we were slowing.

 

Now, we have the confidence to be able to grow across all these products. So, we are not saying we want to pull back on any particular product. We are now getting comfortable about all products.

 

Including unsecured products…

 

Banodkar: Of course. We will not grow disproportionately. They will continue to grow in line with our growth aspiration.

 

Can you shed some light on what kind of collaboration you are looking at with SMBC?

 

Tonse: These are still early days. But there are certain areas of collaboration we are seeing because they (SMBC) have their clients here.

 

If we take a look at the other opportunities that arise, this is what we would like to look at — what they are not able to do and what we can do in India. I can speak a little more after, maybe, a couple of months.

 

Do you expect some more improvement in current accounts-savings accounts (Casa)?  Also, since Yes Bank offers more on savings accounts, it is not low-cost. Do you plan to cut savings account rate?

 

Banodkar: If you look at just the performance of Casa over the last three years, we are among the few banks that have expanded the Casa ratio.

 

I think the point we wanted to make here is that we are conscious on the quality and the rate we offer. We believe we have reached a stage where our acquisition of customers is not just predicated on rates, it is predicated on the quality of service and the products we are offering. And that is the reason why last year we took this bold step to reduce our savings account rate, which on a blended basis used to be 6 per cent, and is well below 4.5 per cent now.