Yes Bank says no to National Asset Reconstruction Company, says will pursue own NPA aggregator

is breaking ranks with the industry in bad loans resolution as it would not sell any default loans to the newly proposed National Asset Reconstruction Company (NARC) as it believes it would be able to recover more than the proposed bad debt agregator.

At the same time the bank is still pursuing its objective of a majority owned asset reconstruction company (ARC) and is waiting for the new set of guidelines from the Reserve Bank of India (RBI) said CEO Prashant Kumar said. RBI has refused Yes Bank permission to hold a majority stake in an ARC citing conflict of interest.

“We would still like to transfer assets to an ARC which be controlled by the bank because this will optically enhance our bank’s numbers to investors and depositors. Though we have provided for these loans and it will not save us any money from a capital point of view but a 3% NPA is optically better for investors and depsoitors than a 15% NPA,” Kumar said.

In the quarter ended March 2021, the bank added fresh slippages of Rs 12,035 crore from Covid impacted sectors like real estate, hospitality and tourism which were under wraps due to the Supreme Court (SC) ordered moratorium on NPAs. After recovery upgrades and write off of Rs 16,303 crore gross NPAs at Rs 28,610 crore or 15.41% of loans were down from Rs 32,878 crore or 16.80% a year ago.

Kumar said transfer to an ARC would also help free up top management time away from managing NPAs and towards revenue earning. But Yes Bank would not want to transfer its bad loans to the envisaged NARC.

“NPA resolution requires a deep understanding of the loan which we have of the accounts we hold. An understanding helps in quicker recovery. We have a team of 100 professionals who have done a good job. Transfering to an ARC would mean depending on their judgement and also paying a management fee to them. We can do the recovery ourselves faster and at a cheaper cost,” Kumar said.

The bank made Rs 4933 crore of recoveries from more than 100 large and small accounts during the whole year and has targeted a Rs 5000 crore number for the next fiscal.

“We expect cash recoveries to beat Rs 5000 crore and slippages to be below that number next fiscal which will help our profitability. Our loans due from 31 days and above are down 21% since the last quarter which gives us confidence on asset quality,” Kumar said.

Yes Bank has restructured Rs 2500 crore of loans under the RBI mandated scheme and made a 10% provisioning on these loans of Rs 250 crore.

Kumar said localised lockdowns as opposed to a nationwide one, faster vaccinations and government incentives to manufacturing through schemes like performance linked incentives will likely aid recovery this fiscal.

The bank hired a net 1000 people during fiscal 2021 taking the total employee count to 22,000 and Kumar said focus on growth especially in retail loans will help the bank improve its earnings profile.