YES Bank to acquire microfinance to reduce legacy PSL drag: MD
Yes bank Executive Director and CEO Prashant Kumar is evaluating microfinance companies for acquisition in order to strengthen the PSL (Priority Sector Lending) portfolio and reduce the burden of legacy PSL issues.
During the first quarter, the bank purchased PSL certificates worth Rs. 4,300 crore. To reduce drag on RIDF (Rural Infrastructure Development Fund), the bank continues to actively engage with select BC (Reporter Banking) Partners for organic growth opportunities while we are simultaneously evaluating a potential acquisition target as well,” he said on the earnings call Saturday.
While still evaluating microfinance entities and the whole process takes some time, the bank maintained the guidance to make such an acquisition in FY24, Kumar said, adding that the bank is also looking at other options such as syndication lending and portfolio buying even as its agriculture and SME loan books grow.
“The focus is on the rural market, and we’d definitely like to see much higher payouts and higher writers on the country side,” he said.
As of June 30, YES Bank’s entire rural portfolio qualified on exact PSL targets, while more than 90 percent of SME writers were PSL compliant. The bank’s rural portfolio was up 33 percent by the end of June, making up 2 percent of retail assets. Rural Expenditure for the current quarter was Rs. 717 crore, up by 34 per cent YoY and 62 per cent QoQ.
Business lineIn June, YES Bank reported that it is exploring the acquisition of an MFI to solve PSL requirements, particularly in the small and marginal farmers category, and grow its high-yield unsecured track record.
Kumar had then said that the bank had seen a decline of about 40 basis points in its return on assets (RoA) due to a shortfall in PSL, which is a shortfall required to be placed in the RIDF and was therefore impacting profitability.