Yes Bank sees strong FCNR demand; corporate lending surges in Q1

Yes Bank is seeing strong demand for foreign currency non-resident (FCNR) deposits under the Reserve Bank of India's concessional swap window, particularly from West Asia, while corporate lending grew sharply in the June quarter (Q1FY27).

In a post-earnings call, managing director and chief executive Vinay Tonse said the bank had capped leverage on the FCNR product at nine times and exhausted its initial limits. It is awaiting fresh limits as banks crowd into the scheme.

"We are seeing sufficient demand," Tonse said. He declined to disclose mobilisation numbers or targets, but said inflows were "more than my usual market share". The bank is currently routing flows through its GIFT City unit and is also in discussions with Sumitomo Mitsui Banking Corp. (SMBC) to secure additional limits.

Corporate lending grew about 41% year-on-year, driven partly by higher liquidity requirements from oil and metals companies. Tonse said oil-related growth may have been partly a one-off due to recent pressures, but expects broader corporate growth to continue.

"Otherwise, I would see a secular growth in the corporate book also across the quarters this year," he said.

The growth was spread across clients and sectors, while the weighted average credit rating of its large corporate portfolio improved from a year earlier. The growth came largely from the bank's own product capabilities rather than its SMBC partnership.

Yes Bank's standalone net profit rose 34% year-on-year to ₹1,071 crore in Q1FY27, while net interest income increased 17.5% to ₹2,786 crore. Advances grew 18.3% to ₹2.85 trillion and deposits rose 14.3% to ₹3.15 trillion. Net interest margin improved 20 basis points to 2.7%. Gross non-performing assets stood at 1.3%, net NPAs at 0.2%, and provision coverage at 81.7%.

Gross slippages fell to a 10-quarter low, while management said there were no signs of stress from the West Asia war or monsoon-related disruptions so far.

The bank aims to grow slightly faster than the industry, with the current pace of credit and deposit growth expected to continue through the year.

Management also expects margins to improve over the medium term, targeting a net interest margin of 3.25-3.5%. It expects support from reducing Rural Infrastructure Development Fund balances to about ₹21,000 crore by March 2027 from ₹27,000 crore, improving its current account savings account (CASA) mix and reviving retail loan growth.

The bank said margins should have an "improving bias" from current levels.

On microfinance, chief financial officer Niranjan Banodkar said an acquisition remains "an area of interest" as the bank looks to meet priority sector lending requirements, but added that there was "nothing, at least in the near term" that it was looking to pursue.