Well into the second year as Chairman of the Board of a redefined YES BANK I thank youfor your invaluable support to the Banks journey of transformation. Over the pastyear the Bank has accomplished one of the most significant balancing acts in Indianbanking history successfully forging the transformation from a very precarioussituation in March 2020 into an organization truly motivated and ready to deliver valueto all its stakeholders. This extraordinary journey of completely reinventing the Bankwas done in parallel to the continuance of unusual circumstances and unknown risks inducedby COVID-19 which has left no portion of our shared existence unaffected.
The transformation journey
The Bank in its transformational journey has made significant changes bringing in clearresponsibility and accountability at multiple levels across the organization. Havingcommitted to responsible banking and social engagement last year your Bank has aspromised dealt with all legacy governance compliance and risk issues with dexterity andalacrity.
In addition the Bank has focused on building and reinforcing the foundation for highquality sustainable growth. It has successfully delivered a very robust liabilitiesmomentum with 55% growth in deposits over previous year. This reflects very encouragingcustomer confidence across all segments.
Over the last year the Bank focused on creating a more granular franchise withbalanced earnings mix between wholesale and retail monetized new businesses throughdigital innovation while conforming to the highest standards of risk managementcompliance and governance. I am delighted to share that in FY21 the Bank recorded 9.06billion UPI transactions a 102% growth over previous year thereby positioning the Bankas a clear market leader in the banking industry.
I especially feel proud of each and every YES BANKer who stepped up putting in theirbest through these very difficult times to help the Bank cross various key milestones ofsuccess. At this critical hour with the Black Swan event of COVID-19 extending into 2021I express my unreserved regard and gratitude for the immeasurable contribution ofessential service providers and many other nameless heroes who are working tirelessly forthe collective well-being of the nation.
With unflagging commitment YES BANK has also paved its way through this dauntingsituation steadily and surely. After a historic Reconstruction Scheme executed in March2020 by the Reserve Bank of India
(RBI) and a consortium of investing banks YES BANK undertook a systemic overhaulputting in place a significantly more robust corporate governance model with extensivechanges across organization processes and business strategy. Building on the threepillars of transparency commitment and accountability the Bank has laid a strongfoundation for inclusive and sustainable growth.
I am happy to report that over the past year we have witnessed a strong resurgence inour operating performance. The operating profit for FY21 increased by 42% over previousyear. We have strengthened the Banks position on our specific strategic prioritiescapital cost liquidity stressed assets and governance. YES BANK saw its credit profileimprove further this year with rating upgrades from multiple institutions. The upgradefrom Moodys and other domestic rating agencies following our successful FPO of INR15000 crore reflected the Banks improving business fundamentals in 2020 itself.
On the asset quality front our legacy stressed book has shrunk and the Bank is wellprovided for with a provision coverage ratio (PCR) of 79%. The management prudentlyaccelerated the provisioning on incremental slippages in FY21 to prevent carrying forwardprovisioning requirements into FY22. On the back of this the Bank posted an overall lossfor FY2021 even as it maintained a profit run with sequential gains through the firstthree quarters of FY21. Importantly capital ratios of the Bank remain healthy which willenable the Bank to tap into growth opportunities in FY22 in line with its statedobjectives. The Banks CRAR and CET1 ratios stand at 17.5% and 11.2% respectively asagainst 8.5% and 6.3% last year.
Economy and business: The road ahead
The Indian economy contracted by 7.3% in FY21 and was expected to clock a double-digitgrowth in FY22 before the second COVID-19 wave necessitated localized lockdowns onceagain. While this will push back the recovery to an extent the economy is expected toreturn to a more normal and robust growth path with continued policy support from monetaryauthorities and the government. It would be equally prudent to prepare for possible weakerconsumer sentiment in FY22. The economy will face some pressure to support adverselyimpacted unorganized rural MSME and contact intensive service sectors amongst others.Given the consequent impact on jobs rising input costs and supply side constraints theReserve Bank of India is expected to keep a watchful eye and monitor inflation trends onthe back of domestic supply constraints and higher global oil prices. For now the RBI isexpected to lean towards boosting growth and hence persist with easy monetary policy.
Discretionary consumption could be affected as consumers wary of a possible thirdwave would prefer to build up on precautionary savings. A possible saving grace for theeconomy for FY22 will be a large budgeted capital expenditure of the Central Governmentexpected to unleash a multiplier effect on the economy. This will ultimately crowd inprivate investments and help revive the job market.
Even as challenges remain the circumstances are likely to have created freshopportunities for the banking sector. COVID-19 has no doubt enhanced the digital footprintin all areas of life human interaction e-commerce education and also remoteworking. Businesses are encountering a shakeout. I am confident they will adapt to achanged landscape and seize new opportunities that emerge out of this fast evolvingtechnological and risk transformation changes in social structure and consumer behaviorunpredictable market dynamics and volatile economic cycles. Given this backdrop YES BANKcontinues to strengthen its strategic foresight and be future ready.
Poised for growth
At YES BANK we continue to closely monitor the current macro-economic scenario and Ibelieve that our coordinated efforts together with stakeholders support willenable us to deliver our commitment to customers and communities. We fully recognize newand challenging risks as they move from Known Unknowns to UnknownUnknowns. The risk culture in the Bank will adapt accordingly.
The effort in the past year has been to build granular retail business and MSME advancebook with customer-centric product launches. A strong foundation has been laid for theRetail franchise over the last few years and the Bank is future ready for growth enabledby product and service differentiation and a focus on quality customers cross-sell theright people skill sets technology and compliance. New customer acquisition was strong inH2FY21 with the Bank opening 477000 CASA accounts and lifetime best retail assetdisbursals at INR 15000 crore and this should continue into FY22.
Even the SME business showed strong traction with H2FY21 disbursals in excess of INR8000 crore.
Business and digital transformation
Granularized growth of our retail franchise continues to be a core part of our growthstrategy driven by our pan-India branch network and leveraging our digital capabilities.The Bank is focused on calibrated cash flow-based growth in high quality retail and selectMSME sectors developing viable ecosystems in these growth sectors. In the corporatesegment our aim would be to expand in select asset light sectors with differentiatedofferings.
As we progress further on our transformational journey the Bank is well placed to dealwith turbulent events and technological disruptions to traditional banking business modelsby fintech players. Over the last twelve months we have digitized our key asset anddeposit journeys to build segmented and personalized digital firstpropositions. With customers at the center of our actions a major pillar of ourretail strategy is to strengthen our customer service with greater empathy care as wellas imbibing technology led innovations to enhance our digital self-serve models. OurLoan in Seconds platform front-end automation initiatives viz. YES Robot CRMplatform YES Genie have resulted in lower turnaround time along with higher productivity.We had 75%+ accounts digitally opened in Q4FY21. To provide our customers with apersonalized banking experience catering to their needs we are looking at transformingour data and analytics thereby deepening our analytics expertise. The Bank has recruited~300 profiles with technology product digital or analytics background to strengthen ourdigital leadership.
In the wholesale banking space the focus would be on granular cash flow backedbusiness to leverage digital or transaction backed relationships with fintech ande-commerce partners. A crucial area of our growth strategy is to fortify our digitaldistribution capabilities in the transaction banking space through curated fintechpartnerships. Transaction banking will develop digital distribution via partnership withfintech companies to reach out to new customers. Key pillars of the wholesale bankingstrategy would be around sector-specific lending opportunities with a focus on newcustomer onboarding deepening product penetration and cross-sell liability growth andfocus on agency banking digital investments and knowledge sector driven relationshipmanagement while maintaining the highest standards of governance and risk management. YESBANK is also targeting selective presence in the infrastructure lending space such asroads ports renewables and transmission cement and metals that are likely to get aboost from enhanced government expenditure. Rural India will continue to be key inpropelling the countrys economic growth. The transformed YES BANK fully recognizesits role and business opportunities in serving Bharat. The Bank will place significantthrust on identifying emerging rural markets to increase value growth and driveprofitability. It will fully serve its rural customers by deepening its branch presence inrural regions and strategically partnering with technology providers for co-originationand cross sell of retail and SME assets insurance securities and wealth offerings.
The Bank has already covered some distance towards its goal of a long-term frugalsustainable cost culture with projects focused on price reductions through bottom-upassessment and zero-based budgeting of various spends.
Environmental Social and Governance (ESG) Goals
The Bank recognizes that sustainable growth is inextricably linked with environmentalsustainability and social development and therefore continues to strategically integrateESG considerations into its core business strategy. By strengthening its frameworks foraddressing environmental and social risks & impacts of its lending activityoperations and supply chain the Bank continues to align more closely with globalSustainable Development Goals. The Bank is also committed to aligning its business to theParis Climate Agreements goal of limiting global temperature rise to 1.5 degreesCelsius starting with definitive actions towards measuring its financed emissions andaligning its electricity sector exposure to the global 1.5-degree decarbonizationpathway. The Bank also achieved a 5% reduction in the carbon emission intensity of itsoperations in FY21 as compared to the previous year. As it continues to work withstakeholders across the spectrum to share knowledge and accelerate action towardssustainable finance biodiversity conservation and climate resilience the Bank willcontinue to make comprehensive voluntary disclosures on how it embeds sustainability intoits operations and governance structures.
Having embraced a dynamic business model adaptable to external realities I am hopefulthat our endeavors to strengthen the Banks technological architecture to bettercater to our customers will enable value creation for all YES BANK stakeholders. Retainingour focus on fulfilling our fiduciary responsibilities to shareholders employees and theregulator the Bank is committed to improving the quality of governance and ensuringeffective risk management practices which benefit all stakeholders. These efforts arebeing undertaken towards building a more transparent more agile and morecustomer-friendly YES BANK.
I believe that with the past behind us the way ahead lies in leveraging the uniquelearnings of last year to stay resilient and responsive and continuing to persevere infulfilling the aspirations and expectations of our customers.
Once again I take this opportunity to thank our valued customers regulatorsinvestors and our other stakeholders with special mention of SBI and other investors whoinvested as part of the Reconstruction Scheme for standing with YES BANK and continuing torepose faith in the organizations vision and leadership.
I am thankful to my Board colleagues for their wise guidance and valuable inputs inestablishing highest standards of governance as we navigated through this period oftransformation. The Bank would not have reached here without the unwavering commitment andloyalty displayed to this institution by over 21000
YES BANKers. The Bank is indebted to their families who also bore the brunt of theprevailing situation since last year. I remain grateful for your unwavering support andcontinued confidence inYES BANK. I wish good health and prosperity for everyone. ThankYou!