Higher risk weights on unsecured consumer credit and bank loans to non-banking financial companies (NBFC) will lower Yes Bank’s capital to risk weighted assets ratio (CRAR) by 30-35 bps, managing director and CEO Prashant Kumar told FE.
The lender, however, does not foresee any need to raise capital, the CEO said. “We are on the very lower end of the spectrum and will likely have an impact of 30-35 bps,” Kumar said.
The CEO pointed out that the bank has been cautious on unsecured loans since January. “As a permanent business strategy, we do not want to increase the proportion of unsecured loans,” Kumar said.
Meanwhile, the bank continues to scout for a micro finance institution (MFI) to help it meet the priority sector lending (PSL) requirement. An MFI would also to help it diversify the loan book into high-yield loan segments, Kumar said. The hike in risk weights is unlikely to affect the bank’s plan as MFI loans are classified under the PSL category.
“MFI helps us meet the shortfall in PSL requirement and also get into higher-yielding product, so it meets multiple requirement for the bank. We are exploring different opportunities and would like to do the acquisition as soon as possible,” he said.
Yes Bank’s net advances stood at Rs 2.09 trillion as of September 30, up 9% year-on-year. Of the total, retail loans stood at Rs 1 trillion, with large and mid-corporates and small and medium enterprises accounting for the rest.
The CRAR stood at 17.3% at the end of the second quarter, with common equity-tier I (CET-1) capital standing at 13.1% and tier-II capital at 4.2%.
The Reserve Bank of India (RBI) has hiked risk weights for bank lending towards consumer credit, including personal loan, from 100% to 125%; NBFCs’ consumer loans from 100% to 125%; credit card receivables risk weight from 125% to 150% and for NBFCs’ credit card receivable, from 100% to 125%. Kumar said the hike in risk weights would lead to higher lending rates from all banks for all the loan segments covered under the RBI circular.