'Target is to open 80 branches every year for next few years'

Best in class asset quality, strong retail granularity, and a sustainable return ratio -- these are the things we will look at, says Yes Bank's new MD and CEO Vinay Tonse.

Vinay Tonse, who took over as managing director and chief executive officer of Yes Bank earlier this month, says the lender will focus on growth in retail loans while keeping asset quality in mind.

In an interview with Manojit Saha in Mumbai, Tonse, along with Group Chief Financial Officer Niranjan Banodkar, says the focus is also on how to benefit from the tieup with SMBC, the Japanese financial major that has picked up a 24.9 per cent stake in the bank.  

What are your immediate priorities?

Tonse: I am seeing a solid foundation. Among the priority areas, one would be growing our liabilities as well as assets. We will be growing, but with quality. The change of assignment does not change my thought process. There will be no aggression, which will bring down the quality. And when I talk about quality, it is not only on the assets, it’s also on the liabilities. I’m seeing a lot of good work that has happened in a few years, particularly in the past one year. Definitely business is a top priority for us, along with profitability.

The second is, of course, how well we can utilise or how well we can get support from collaboration with SMBC.

This is something I’m focusing on. Also, the cost to income ratio has declined. This is something we will focus on. 

Focus on Retail Loan Growth

So far as loan growth is concerned, retail loans were growing in single digits. Would you like to beef up growth in retail loans?

Tonse: If you look at the history of this bank, it was always a sort of corporate bank. And even in the past five or six years, corporate exposure has been reduced and we have gone into retail.

The focus will remain more on retail. And particularly, we have a branch franchise, which is something I would like to make use of. We opened 82 branches in the past one year and the target is about 80 every year for the next few years.

Digitally we are strong, but we feel the physical connect with customers should be there. It somewhere gets lost in the digital. We will improve customer experience. Eventually, we will look to be a high-quality bank, a consistently profitable franchise with the best in class asset quality. Best in class asset quality, strong retail granularity, and a sustainable return ratio -- these are the things we will look at.

Banodkar:  Growth in retail banking was in single digits for the last few quarters. But if you see the momentum here, it has only been improving. And we have always said in retail there were certain products -- just using the lens of asset quality and using the lens of profitability, we had recalibrated some of the growth in these products.

Over the last two or three quarters, we have been clear which products we are growing. If you now look at the disbursement run rate, it is strong. If you now see the sequential growth rate in retail banking, you look at March, when we declared that the growth rate was already at 4 per cent. This gives us the confidence that if this momentum continues, when we look at FY27, we should clearly be a double-digit growth engine, even in retail. 

Retail and Wholesale Loan Balance

How much is the share of retail loans in the overall loan books?

Banodkar: Retail and wholesale loans are fairly balanced. The share of retail loans is about 46 per cent. Commercial banking is around 26 per cent. And corporate and institutional banking is about 28 per cent. 

Future Growth Expectations

When do you see retail crossing 50 per cent?

Banodkar: The mix now is fairly balanced. We will remain in this range, 1 or 2 per cent plus or minus.

Yes Bank's growth in loan books was 11 per cent FY26 while that for the banking system was 16 per cent. What are your expectations on this in FY27?

Banodkar: We will continue to evaluate if there are better, faster ways on growth or profitability. If there are levers in hand, we’ll continue to continuously evaluate that.

Within retail which segments will you look to grow faster?

Banodkar: About two years ago, there were headwinds on asset quality. And we said we were slowing.

Now, we have the confidence to be able to grow across all these products. So, we are not saying we want to pull back on any particular product. We are now getting comfortable about all products.

Including unsecured products...

Banodkar: Of course. We will not grow disproportionately. They will continue to grow in line with our growth aspiration. 

Collaboration with SMBC

Can you shed some light on what kind of collaboration you are looking at with SMBC?

Banodkar: These are still early days. But there are certain areas of collaboration we are seeing because they (SMBC) have their clients here.

If we take a look at the other opportunities that arise, this is what we would like to look at -- what they are not able to do and what we can do in India. I can speak a little more after, maybe, a couple of months. 

Net Interest Margin Targets

The net interest margin in FY26 was 2.6 per cent as against 2.4 per cent in FY25. Do you think it can cross 3 per cent over the next few quarters?

Banodkar: There has been a drag on margins that the bank has had, which is the Rural Infrastructure Development Fund balances. Had there been no RIDF issue, the margin would be more than 3 per cent. We will also continue to work on our cost of deposits. There will be a continuous focus on improving current and savings accounts. Also, growth in retail assets is coming back. Those have better yields than corporate or commercial banking.

So in two-three years, we should comfortably be a "plus 3 per cent margin" bank. If we can get into the 3.25-3.50 per cent zone, that becomes a good spot to be working with.