YES Bank to raise $ 1billion from ADRs in next fiscal : Rana Kapoor, managing director

PANAJI: India’s fourth largest private sector Bank is on the verge of raising $1billion from American Depository Reciepts (ADRs) for the first time in its history. On a visit to Goa, YES Bank managing director and chief executive officer Rana Kapoor, who is also ASSOCHAM president, tells TOI that he foresees the country could grow at 7.8% in the current financial year.Excerpts:
Is YES Bank looking to raise fund in the near term?
YES Bank has taken an enabling approval to raise Rs 10,000 crores of Infrastructure bonds / Tier I / Tier II bonds to augment capital funds. Currently our bank is well capitalized with Tier I capital at 11.5% and total CRAR at 15.6%. We do have shareholders’ approval to raise up to $1 billion. We prefer raising money through an ADR issue under the $1-billion capital infusion plan next fiscal year. It will be our first such issue and it helps the profile of the bank.
RBI governor Raghuram Rajan has consistently asked banks to do more to transmit earlier rate cuts. What are the concerns that prevent the banking industry from doing so?
One needs to appreciate that the banking sector’s response is bound to be lagged as the liability book of the banking sector gets re-priced gradually at lower costs. Structural factors like high small savings rate and elevated levels of effective rates of return on tax free bonds will continue to hinder complete transmission. In addition, cyclical factors like liquidity and banking sector’s risk appetite will play a role in determining the extent of monetary transmission.
The bank has grown from strength to strength and the move to focus on retail and SME advances appears to have paid off. Will the bank continue with this strategy?
In the current phase of growth, YES Bank aims to become the finest large bank in India by 2020. The strategy will include consolidating the bank’s presence in existing strongholds like corporate and SME banking, while significantly pushing the bank’s presence in retail and augmenting the overseas foray with a measured approach.
How has the bank performed in Goa? What are the future plans for the bank in the state?
Goa has been a focus state for YES Bank since our inception. We have been working very closely with several government institutions like the Goa Horticulture Development Corporation, The Revenue department and the Goa State Cooperative Bank. On the retail side, we have seven full-fledged branches in Goa with eight more set to open.
A year has passed since the Narendra Modi-government came to power and the gloss appears to have faded.
The NDA government under the leadership of Prime Minister Narendra Modi, has taken decisive steps to revive the economy, revitalize the bureaucracy, boost inclusive growth and improve the global perception of India as an investment destination. The initial euphoria may have given way to a sense of realism but there remains a hope of sustained and focused reforms. While there still is some way to go in terms of big ticket reforms like GST and Land Acquisition, the action taken so far in terms of opening up FDI in key sectors, transparent auction of coal blocks, new gas supply mechanism, renewed focus on renewable energy, single window clearance and promoting financial inclusion are extremely encouraging. We are talking about a large and complex economy. It is reasonable to expect that it will take another year before we actually see the significant impact on the ground.
Do you feel that the ease of doing business has really improved?
Bold and necessary reforms that are underway will surely usher in an era of high value investments, infrastructure growth, job creation, skill development and economic prosperity. I see India breaking into the top 50 of the World Bank Ease of Doing Business rankings in the next few years.
Taxation has been a stumbling block with mixed noises coming from successive governments.
As far as consistency goes, it is definitely a vital aspect of governance that global as well as domestic investors will look for while making decisions. But it is also important to take the right steps in the interest of the nation, where there is a need to take corrective action.
What is your outlook for India’s growth prospect this year?
With tailwinds from a benign global commodity price environment, India’s growth prospects are likely to improve further with support from a gradual recovery in the investment cycle and improving urban demand. Some of the growth drivers have slackened. Appetite for private investment remains subdued on account of levered balance sheets while rural demand is showing signs of moderation. The key lies in channelizing public investments. This requires unabated traction in reforms. Secondly, the government has to create room for incremental monetary easing. Efficient management of the food supply chain, and activation of safety nets to safeguard rural demand are crucial steps. Global headwinds in the form of eco-political uncertainty in Greece, anticipated US monetary policy normalization, and slowdown in China are likely to constrain growth. I believe the acceleration in India’s GDP growth will be limited to 50 bps and come at 7.8% in FY16 vis-à-vis 7.3% in FY15.