“Citi’s business offers a good potential, not only credit card but wealth and retail also.”
Optimistic about economic prospects despite the second wave of Covid-19, Prashant Kumar, Managing Director and CEO, Yes Bank, said the bank’s elevated stressed asset pool should be seen as an opportunity to add to the capital post-recovery. In an interview with BusinessLine, he also said the bank may look at capital raise if the economy does well and indicated interest in Citi’s Indian consumer banking operations. Edited excerpts:
As of now, I don’t see any fund requirement. But if there is a lot of improvement in the economy and credit growth occurs, there may be some need. Since all approvals are in place and depending on the situation, we will take a call. We had taken an overarching approval of ₹10,000 crore, but the requirement will not be so much.
How is your credit card business doing? Are you interested in opportunities like Citi’s consumer banking business?
The credit card business is doing very well. We are not very aggressive and cautious in expanding and are being selective in terms of customer acquisition. As a result, our book has increased by 40 per cent, and the spend has increased by 36 per cent.
Citi is running a profit. We will see the opportunity and cost. Their business offers a good potential, not only credit card but wealth and retail as well. Once they come out with the exact EoI, we will examine it.
Did you apply for a license for a new umbrella entity for retail payments?
We did not apply for the NUE. We were interested if we could bring out our expertise in innovation. If one has a significant stake, then you can influence the strategy. We do not want to be a minority partner.
What is the status of the proposal of an asset reconstruction company?
We had applied to RBI, and we wanted an ARC where we would have a controlling stake. The RBI is not comfortable giving a controlling stake to a bank as it would be a moral hazard. Since they have set up a committee to look at the ARC framework, we will wait for the report and then approach the RBI based on the proposal.
Are the elevated stressed assets a concern for the bank?
A stressed asset is an opportunity. No other bank would have a pool of stressed assets of almost ₹45,000 crore, which you can recover and add to your capital. Once we have made the adequate provisions of almost 80 per cent and even the ₹17,000 crore book, which we have technically written off, which means 100 per cent provision. Any recovery would directly add to our profits.
How will the earnings be this fiscal with the accelerated provisioning already made?
There will be no need to make further provision in the existing book as it is adequately provided. There may be some slippage, which will be taken care of by the recovery. For Covid, no more provisioning is required. We have not made any provisions for the second wave as our SMA 1, and SMA 2 book has come down and since we have accelerated provisioning on the existing book.
What is your outlook on the economy given the Covid surge? Will it further impact the bank’s book?
Sectors that have been impacted by Covid first wave are affected by the second wave also. Those accounts have already been recognised as NPAs. This time, things are much better as this time there is not a complete lockdown but restrictions. Economic activities, trading, taking place. Once we come down from the peak and focus on vaccination, the overall improvement would happen much faster. There is a concern as many people have been infected. It has an impact but the first quarter is a lazy quarter for banks. If we can cross the hurdle in the next 15 to 20 days, the effect would be lower.