Yes Bank targets lower cost of funds to lift profitability

Mumbai: Yes Bank Ltd has lowered interest rates on savings accounts by up to 4%, joining the bandwagon of private sector lenders aiming to rein in deposit costs and bolster margins.

The move, announced during the bank’s earnings call on Saturday, is part of a wider effort to improve profitability while maintaining a healthy CASA (current account and savings account) ratio.

Until recently, the bank was offering an interest rate of 7% on savings balances above ₹10 lakh—one of the most generous in the market. Now, balances between ₹10 lakh and ₹25 lakh will earn 3.5%, ₹25 lakh to ₹50 lakh will fetch 4%, and balances above ₹50 lakh will receive 5%.

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“We think we would be able to protect our CASA ratios and at the same time reduce the cost of deposits,” said Prashant Kumar, managing director and chief executive officer, Yes Bank.

The bank reported a 63.7% jump in net profit to ₹738.1 crore for the March-ended quarter, supported by lower provisions, improved asset quality, and stable funding costs. That’s up from ₹451.9 crore in the same period last year. The cost of deposits remained flat at 6.1%, while the cost-to-income ratio improved significantly to 67.3% from 75.8% a year earlier.

Net interest income rose 5.7% year-on-year to ₹2,276 crore, driven by moderate loan growth and the phasing out of high-cost borrowings. 

Kumar said the bank is now focusing on higher-yielding retail products such as loans against property, affordable home loans, and used car loans—while scaling back on lower-yield segments like prime home and new car loans.

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“We will not go for very high risk, high yield, but definitely we will go for a better yield, other than the plain vanilla product like new car loan or the prime home loan, where the yields will be better, but we have full control on the credit cost,” said Kumar.

The bank’s loan book grew 8.1% year-on-year to ₹2.46 lakh crore, with sequential growth of 0.6%. However, the retail portfolio shrank 3.4% to ₹1.01 lakh crore, even as SME and mid-corporate lending grew more than 20%.

Non-interest income also supported revenue growth, rising 10.9% year-on-year to ₹1,739 crore.

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Asset quality continued to improve, with gross NPAs at ₹3,935.6 crore, translating to a gross NPA ratio of 1.6%, down from 1.7% a year ago. Net NPAs dropped to ₹800 crore, or 0.3%, from 0.6% last year. Fresh slippages stood at ₹1,223 crore during the quarter.