MUMBAI: YES BANK, India’s sixth-largest private sector bank, has achieved a notable 20.9% year-on-year (Y-o-Y) growth in total deposits, reaching INR 2,65,072 crore as of Q1FY25. This significant growth reflects the strong trust and confidence that customers place in the Bank, emphasizing the successful turnaround that the Bank has scripted in the last four years. It also highlights the solid financial foundation and customer-focused strategies, that the Bank has implemented.

Amidst a challenging environment where the banking industry faces the task of balancing deposit growth with increasing credit demand, YES BANK has not only kept pace but has exceeded industry averages. This success aligns with the broader industry’s focus on deposit growth, as emphasized by recent regulatory guidance aimed at bolstering the financial resilience of the banking sector.

A key driver of YES BANK’s success has been its strategic emphasis on enhancing its low-cost deposit base. The Bank has seen a substantial improvement in its CASA (Current Account Savings Account) ratio, which increased to 30.8% in Q1FY25 from 29.4% in the same quarter of the previous year. This improvement is the result of the Bank’s focus on granular CASA deposits, leading to the addition of approximately 17 lakh new CASA accounts during FY2023-24. A 23% increase in CASA balances further strengthens the Bank’s low-cost deposit base, showcasing the effectiveness of its customer acquisition and retention efforts.

This strong performance is also supported by strategic investments in expanding the Bank’s distribution network. In FY2023-24, YES BANK opened 133 new branches in CASA-rich clusters, bringing its total to 1,453 outlets across various states and union territories. This expansion has allowed the Bank to offer a broad range of financial products, deepening customer engagement and driving deposit growth. As a result, the Bank has achieved a Compound Annual Growth Rate (CAGR) of 22.3% in branch banking-led deposits over the past two years, significantly outpacing the industry average of 11.9% and the 17.4% CAGR among private banks.

The Bank’s outperformance in deposit growth can be attributed to three key factors:

• Productivity Gains: Enhancing efficiencies within its existing and expanding franchise
• Acceleration in Customer Acquisition: A strong focus on acquiring high-value customers
• Rise in New Acquisition Value (NAV): Improving the quality and value of the deposit base

As YES BANK continues to build on this momentum, its focus remains on sustaining this growth by deepening customer relationships, expanding its product offerings, and ensuring that its deposit growth strategy stays aligned with evolving regulatory requirements and market conditions.

Looking ahead, this impressive deposit growth positions YES BANK for enhanced financial stability, increased lending capacity, and improved profitability will be the key drivers that will enable the Bank to capitalize on emerging opportunities and further strengthen its market presence in the years to come.

The post YES BANK’s Impressive 20.8% Year-on-Year Deposit Growth: A Testament to Resilience Amid Regulatory Scrutiny appeared first on NRI News.

Mumbai 13 June 2024 – Inflation, the gradual increase in the general prices of goods and services, erodes the purchasing power of money over time. For investors seeking to preserve and grow their wealth amidst inflationary pressures, real estate has emerged as a popular hedge against this dreaded but inevitable dynamic, finds ANAROCK research.

Shobhit Agarwal, MD & CEO – ANAROCK Capital, says, “After the 2019 elections, average residential prices across the top 7 cities have appreciated at a Compound Annual Growth Rate (CAGR) of 6% – rising from INR 5,600/sq.ft. in June 2019 to INR 7,550/sq.ft by the end of FY 2024. A similar trend was witnessed concerning the 2014 elections. Average prices across the top 7 cities saw an annual rise of over 6% in 2014 when compared to the preceding year – from INR 4,895/sq.ft in 2013 to INR 5,168/sq.ft in 2014.”

Price growth over the last three elections

Conversely, before the 2019 elections, average prices rose by a mere 1% annually and remained rangebound during the tenure.

Source: ANAROCK Research, Data for Top 7 cities

Supply – Demand Dynamics

In the last decade, there were periods when the supply of real estate exceeded demand, resulting in stable price growth that kept pace with inflation in the pre-pandemic era. Between 2013 and 2020, the top 7 cities recorded a cumulative supply of 23.55 lakh units against a demand of 20.68 lakh units.

Gradually, demand rose in tandem with new supply. Available inventory peaked at approx. 8 lakh units by the end of 2016. However, following the pandemic, residential real estate saw a rapid recovery, leading to significant price growth that has outpaced general inflation.

Source: ANAROCK Research, Data for Top 7 cities

Real estate – a hedge against inflation

Inflation, the gradual increase in the general prices of goods and services, erodes the purchasing power of money over time. For investors seeking to preserve and grow their wealth amidst inflationary pressures, real estate has emerged as a popular hedge against this dreaded but inevitable dynamic.

Steady population growth coupled with urbanization consistently fuels housing demand. As more people migrate to cities for better opportunities, rising residential demand exerts upward pressure on prices.

Moreover, real estate investments can generate rental income, which potentially grows over time in response to inflation. As the cost of living rises, landlords typically adjust rental rates. Also, investors can leverage their real estate assets to borrow funds for further real estate acquisitions.

During inflationary periods, the cost of borrowing (interest rates) typically rises. However, investors who have secured fixed-rate financing before inflationary pressures set in can benefit from lower borrowing costs in real terms, enhancing the profitability of real estate investments.

“Real estate investments offer diversification benefits within a portfolio,” says Agarwal. “Unlike financial assets such as stocks and bonds, which may be negatively impacted by inflationary pressures, real estate – including residential, commercial, and retail – provides a tangible asset with intrinsic value. Diversifying investment portfolios with real estate holdings can mitigate overall portfolio risk and enhance long-term returns.”

Residential real estate prices have risen continuously since 2013, and in the last two years, appreciated at a CAGR of 13% while CPI inflation moderated by 1.3% on an annual average basis to 5.4% at the end of FY24. This trend signifies a clear outperformance of real estate prices compared to inflation.

Source: ANAROCK Research, RBI

With tangible real estate, in response to growing investor demand for inflation protection, financial instruments such as real estate investment trusts (REITs) and inflation-linked bonds have gained popularity. REITs, which invest in income-generating real estate, offer investors exposure to the real estate market coupled with liquidity and diversification benefits. Similarly, inflation-linked bonds adjust their principal and interest payments based on changes in inflation rates.

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Rahul Singhal, Subject Matter Expert, S.N. Dhawan & CO LLP, expressed, “In 2023, the RBI’s strategic regulatory actions prompted pivotal shifts in the NBFC landscape, compelling a recalibration for heightened supervision and adjusted risk weights. As we approach 1 April 2024, the impending IT governance directives introduce a crucial cybersecurity imperative, essential for ensuring operational resilience in an increasingly digital financial ecosystem. Casting an eye to 2024, the NBFC sector is thrust into a dynamic landscape, steering through challenges and seizing growth opportunities presented by digital transformation and innovative funding mechanisms. Our NBFC tracker report illuminates the indispensable role of robust risk and governance frameworks, alongside adaptability to regulatory changes, in sculpting a resilient and vibrant future for the sector”.

Sectoral deployment of credit by NBFCs

The NBFC sector saw a significant 20.8% increase in credit growth between September 2022 and 2023, driven mainly by a surge in personal loans (32.5% growth) and agricultural lending (43.7% growth). Over the past four years, personal loans grew at an impressive CAGR of 33%, outpacing the overall credit growth. Recent risk weight adjustments for retail loans may affect future credit growth. In terms of market share, personal loans increased by 2.3%, and agricultural loans rose to 1.9% in September 2023, up from 1.7% the previous year.

GNPA – Gross Non-Performing Assets

In the first half of FY24, NBFCs saw a drop in their GNPA ratio across all sectors. Overall, the GNPA ratio decreased to 4.6% in September 2023 from 5.9% in September 2022. Personal loans had the lowest GNPA ratio at 3.6% by September 2023. Private NBFCs still face a high GNPA ratio of 12.5% in industrial advances, representing 21.6% of the total NBFC sector GNPA. All sectors showed improvement in their GNPA ratios by September 2023, with the services sector witnessing the most significant drop to 8.1%.

NBFCs’ sources of funds

As of September 2023, borrowings remained the primary funding source for NBFCs. Compared to September 2022, NBFCs’ reliance on borrowing increased by 1.1% to reach 62.1% in September 2023, while the share of share capital and reserve and surplus slightly declined to 27.9% from 28.5% in September 2022. Within borrowings, banks and debentures were the major sources of funds, with NBFCs raising 25.0% through bank borrowing and 19.6% through other debentures by September 2023.

Credit risk in NBFCs

The RBI conducted stress tests on 146 large NBFCs to assess credit risk resilience across three scenarios: baseline, medium, and high risk. As of September 2023, these NBFCs maintained a 24.4% capital adequacy ratio and a 3.1% GNPA ratio. In the baseline scenario, GNPA was 3.8%, while in medium and high-risk scenarios, it rose to 5% and 6.3% respectively. The number of NBFCs failing to meet the 15% regulatory standard increased to 9 for baseline, 15 for medium risk, and 21 for high-risk categories.

Top NBFCs and a track of their performance

In Q2 FY24, top NBFCs managed IN₹7,65,753 crores in assets, up 18.2% from IN₹6,47,855 crores in Q2 FY23. Capri Loans led with a 59.1% AUM growth to IN₹12,358.5 crores, followed by Satin Creditcare and Bajaj Finance with 38.6% and 32.9% growth respectively. Top NBFCs saw a notable increase in average return on assets (ROA) from Q2 FY23 to Q2 FY24, rising by approximately 0.5% to reach around 3.5% in Q2 FY24.

In Q2 FY24, the average capital adequacy ratio for top NBFCs improved by 1.7%, reaching 29.7% from 28.0% in Q2 FY23. PNB Housing Finance saw the most significant increase, rising by 6.3% to 30.4%, followed by Capri Loans with a 6.2% improvement.

Additionally, the majority of the NBFCs saw an improvement in their GNPA ratio during Q2 FY24. PNB Housing Finance led with a 4.3% improvement compared to Q2 FY23, followed by REPCO with a 1.6% improvement.

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