Sumitomo Mitsui Banking Corporation’s acquisition of a 20% stake in Yes Bank, the largest cross-border investment in India’s banking sector, marks the final chapter in the bank’s reconstruction, managing director and CEO Prashant Kumar tells Kshipra Petkar in an interview. Excerpts:
Your views on the tenure at Yes Bank?
I think we were given the responsibility to completely come out from the reconstruction part, bring the bank back to normal. I think the only thing which was left from this perspective was having a long-term strategic investor. With SMBC coming, that concern has been addressed. I think this is something which was immediately needed.
Are there any talks of SMBC increasing its stake?
We don’t know. It depends on them.
What’s the impact on the bank’s rating and business opportunities?
The bank was having A+. Already, we got one rating upgrade – we are AA-. The moment we move from AA- to just one rating upgrade, AA, funding cost changes dramatically. A large number of corporates and government departments follow the policy of doing banking with a bank which has to have a rating of AA. It will open the door for us for multiple things —deposit, loan and fee income.
How will Yes Bank be beneficial to SMBC?
It only provides lending services, and does not have transaction banking and digital solutions. With SMBC being the largest equity holder, we are hopeful that doors would be open for us to provide these services to those corporates, resulting in handsome fee income.
What is the bank’s singular focus for FY26?
We want to achieve 1% ROA. We are working towards it by having an appropriate loan growth and deposit growth. In the first quarter, we already had 0.8%.
The loan growth was muted at 5%. Are you confident of reaching 12–15%?
Q1 numbers are not lowering our confidence of achieving that growth number in future.
Where will deposit growth come from and how are rates being managed?
Deposit growth is not an issue. Deposit growth becomes a struggle where you are not able to grow your retail. Our retail growth is 20%. You will get corporate deposit if you are willing to pay a price. We are reducing our rate of interest continuously.
What is the guidance for net interest margins for FY26?
There is no guidance. We have been able to protect our margins. It is stable at 2.5%. Second quarter would be a big challenge for everyone. Our aim would be to protect NIMs in the second quarter. Q3 and Q4 will see some improvement.
Your views on unsecured loans and asset quality?
Unsecured is not more than 7% of the total loan. We are not very aggressive in growing the unsecured. Both unsecured and credit card have not only stabilised, but have also started trending downwards. It would normalise by the end of FY26. The recovery target is Rs 5,000 crore. It will mainly be from retail. For us, the advantage is that we continue to have recoveries from security receipts from ARCs which is around Rs 1,000 crore.
What do you consider as the most defining decision?
Every decision for us has been defining. From the record $2-billion FPO in 2020 to a landmark ARC sale and now the SMBC transaction — each step has been pivotal. SMBC’s entry is more than a stake. This is the opening for a foreign capital into the Indian financial space.