There is no question that we faced economic headwinds starting last year and a look at GDP and the quarter-by-quarter trend-line across all banks would show that the provision coverage ratio (PCR) was increasing, which meant that reevaluating risk portfolios was already the order of the day. After the lockdown and after the early unlocking, month by month we are getting a better sense of what to do and it is the de-bottling of liquidity that is now the most important thing. There is no question there will be de-growth. When the new board was appointed on March 13, the focus was on what priority would be. It was immediate liquidity, capital adequacy, and the re-organisation of the ranks. Now, there is stability on liquidity and a steady inflow of new deposits from retail and institutional customers. The board and shareholders have in principle also cleared a fund of up to Rs 15,000 crore and we are working on our stressed asset portfolios.
Are there plans to sell the stressed assets to third parties?
We leave it to the immediate management to suggest alternative solutions but what I can say is that as long as everything is in compliance with regulations we are open as a board to out-of-the-box solutions.
There was a lot of optimism around retail banking as a segment for business. How does that look now and for the future?
As far as YES Bank
goes the bank had a very strong retail and digital strategy and in recent years even entered the credit card business which is a good portfolio. The retail side of the business is still growing and our earlier problems were to do with the corporate side. How do we grow from here? While the market is competitive and challenging there are new areas for differentiation. Contactless banking, account opening and how you process KYC norms digitally and more can be differentiators for the future. YES Bank’s service standards have always been competitive.
The RBI has floated a discussion paper on corporate governance in banks. The government has talked around that for a while.
I think the fundamental part of good governance has to come from both lender and borrower, especially with large business accounts. In principle we have to change laws and regulations to keep up with the times because what worked a decade ago doesn’t today. The other is that public-sector and private-sector banks need equal attention as do all financial entities that are dealing with public money. Most corporate governance panels have focused more on private sector
and not PSUs which in my view are India's prime economic assets. SBI has some 500 million account-holders, PNB has 170 million accounts and 11,000 branches. That needs to be valued and embellished. Also, old banking act laws need to be amended and upgraded to ensure they don't override or conflict with SEBI regulations for listed entities. Hence the draft guidelines issued by the RBI are a welcome first step to enhancing governance amongst banks. I'm sure other regulators will also review the same and decide on its applicability as desirable.
The Bank Boards Bureau was to be a transient arrangement till the government formed a bank holding company to manage shareholding in public sector banks. Has the time for it come now, and how would it help the banking sector?
As far as PSBs go, there is no question that they need to be revamped. The government has to keep 51 per cent ownership to maintain its solidity but we do need to make them far more competitive and progressive in the areas of technology, customer service, risk management, employee performance and more. PSU banks have huge advantages thanks to the balance sheet and its reach. I firmly believe that while PSBs have strong competencies; they, however, need to be up-skilled and need more quality talent to at the management level in specialised functions and at the board and to get rid of the fear factor of doing business. I think it is time for BBB to introspect how to attract high quality talent needed for these institutions to compete with their private sector
The Nayak committee recommendations, including the holding firm concept, may be reevaluated for its applicability under the current situation.
How will the declining value of corporate assets be maintained for banks to recover money?
Banks will have to take a close look at large accounts and see where there was pre-Covid-19 exposure and what has followed later. There will be players with new growth prospects and some will have to take the hit. Take the auto sector, for example. Those with low productivity and inefficient use of capital will face challenges. Equally, there has been a $6-trillion infusion into the global economy, along with our domestic infusion, so some of that will make its way into businesses. I expect mergers and acquisitions to follow.