Yes Bank | Banks | Loans

Market Structure: Monopolistic Competition

Case Study: Yes Bank

By Parvez Rangwalla Email:

Welingkar Institute of Management Development & Research

Banking Sector in India:
The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: • Early phase from 1786 to 1969 of Indian Banks • Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms. • New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country: • 1949 : Enactment of Banking Regulation Act. • 1955 : Nationalization of State Bank of India. • 1959 : Nationalization of SBI subsidiaries. • 1961 : Insurance cover extended to deposits. • 1969 : Nationalization of 14 major banks. • 1971 : Creation of credit guarantee corporation. • 1975 : Creation of regional rural banks. • 1980 : Nationalization of seven banks with deposits over 200 crore

All values in Rs. Crores


Financial Indicator

21 Old Private Banks 1,09,805 49,545 58,232 1,26,093 4,609 2,142 9,472 2,519 11,992 6,238 2,503 8,742 3,249 1,786 1,463

9 New Private Banks 1,58,743.80 85,255.33 1,12,666.53 2,41,183.13 5,771.17 2,664.40 16,068.95 5,092.23 21,161.18 11,291.32 4,911.07 16,202.39 5,116.35 2,941.14 2,017.63

Total 30 Private Banks 2,68,549.26 1,34,801.03 1,70,899.19 3,67,276.32 10,380.80 4,806.47 25,541.79 7,611.54 33,153.33 17,530.00 7,414.59 24,944.59 8,366.24 4,727.20 3,481.46
(Source: IBA Bulletin, October 2004)

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Deposits Investments Advances (Credit) Total Assets Gross NPAs Net NPAs Interest Income Other Income Total Income Interest Expended Operating Expenses Total Expenditure Operating Profit Provisions/Contingenc ies Net Profit

The Beginning:
Yes Bank, established by two former top executives of the Indian operations of Netherlands-based Rabobank, Rana Kapur & Ashok Kapur. Despite the crowded field, Rana Kapoor, Yes Bank chief executive and co-founder, said the bank will stand out through a “knowledge-based approach.” “Each branch will offer value enhancing information and services depending on the location and the profile of customers in the catchment area it caters to. For instance, we plan to cover the major agricultural belts of India so our branches located in these belts may have special desks dispensing information on horticulture, floriculture or irrigation techniques,” Kapoor says.
CVC, Chryscapital, Russel Infra, 25% Other Management people, 3%
Rana Kapoor & Ashok Kapur, 52%

Rabobank Nederland, 20%

Key Features:

1. Food & Agribusiness: Ex. LOANS OF ABOUT Rs. 25,000 to bee farmers against their stocks of honey as collaterals.

2. Futuristic branch: A chip embedded in debit cards of high value customers alerts staff when customer walks into the branch. An executive meets him & greets him by name.

3. Double Security: Besides their regular password, a second code is also generated just in time & delivered to the customer’s mobile.

Key Features:
4. Yes- Professional Entrepreneurship Programme: The bank tapped the best B school alumni network to hire the top notch graduates unhappy with the jobs they had chosen. That’s now become a campus strategy. Currently there are 270.

5. Microfinance: Among the earliest to start offering micro-finance loans directly to poor customers.

6. Money monitor: Savings account customers get an online personal finance & wealth management software.

Strategies & Results:
1. Knowledge Banking Approach: Bank is focusing on 6 key sectors & has put together a experienced industry & banking professionals who have necessary knowledge & skill set in these sectors. Manageable exposure to stressed sectors , total exposure to real state, iron & steel, sugar, textiles & auto components sectors is about 10%. Fees Income comprises 23% of the total income  Frontrunner in fees  55% of the income comes from advisory services
Figures are as on Q4, 2008-09

Strategies & Results:

2. Focus on lending to large & mid size Indian corporates select MNC’s & government institutions. Retail advances constitute only 1.1% of total advances. Zero exposure to credit cards, mortgages & auto loans. No exposure to toxic loans No secondary market equity exposure since April 2008, Zero risk in this asset class.
Figures are as on Q4, 2008-09

3. Technology is outsourced based on rental model (built-own-operate) resulting in savings of about 30%. ATM’s are outsourced, soon even branch building may be outsourced.


Service Innovation:
Sustainable investment banking (SIB) – Established a business model for specialist advisory in sustainable ventures as social, alternative energy and environment. YES TOUCH - Electronic gateway to the branch, allows clients to bank round the clock. Its a state of art smart technology interface which is the first interactive point provided by a dedicated relationship manager for each client, extended banking hours and customised wealth management solutions. Yes Money plant – Direct marketing campaign which portrays the symbiotic relationship between the banks and its clients. It provides advisory services ranging from liabilities to insurance and mutual funds. The Knowledge Cafe – It’s a Wi-Fi enabled area to enable discussions, advisory services and information dissemination. This innovative technology is the first time in any bank worldwide powered by Intel and Cisco. Yes Lounge- It’s an exclusive wireless banking enclave for the banks YES FIRST, Global Indian and YES Private clients. It is designed to offer comfort, privacy and intimacy for business and financial discussions.

Awards and Recognitions:

Most innovative recruiting and staffing program award in 2007 Most innovative HR practices award at Asia Pacific HRM conference in year 2007. NASSCOM award in 2006 in IT Innovations in emerging India. Environment Leadership award from USAID. Euro money Trade Finance Deal of the Year award in March 2007 – it’s the only Indian bank to receive. 6. Financial Insight Innovation award for the most innovative E-Payment solution for two consecutive years, FY08 and FY09. 7. National award for data centre. 8. Ranked 1st in the business today Annual Survey 2008, among its peers. (KPMG BEST RANKS) 9. Ranked 2nd among new private sector banks and 1st in key parameter of growth among 64 10. Banks in India (Financial Express Survey-2007). 11. Ranked 3rd among all private and public sector banks as per 2006 survey. 12. Ranked 4th by Thompson Financial Securitized Debt for the year 2008. 13. The only ‘Greenfield’ private sector bank set up in the last decade. 14. India’s 1st Food and Agricultural Private Equity. 15. Only Indian bank to feature in the ‘World’s 25 Unsung Innovative companies’, by business Week.

1. 2. 3. 4. 5.

Journey so far for YES BANK:
1. 2. 3. 4. Currently has 117 operational branches across 84 locations. Two national operation centres and 81 offsite ATMs Total Net Income of Rs. 9.8 billion in the FY 2009. Commercial banking relationships with 150 large companies.

Current Capital Structure:

Road Ahead:

1. Received an approval to set 117 branches and 200 offsite ATM centres across India. 2. Gear up to an economy upturn to reach a balance sheet figure of $30 billion by 2012. 3. Plans to add new relationships with 350 large and 2500 mid-sized companies. 4. Plans to welcome a Strategic partner at some time in future to launch as a Global Bank. 5. Formulation of a ‘robust risk management committee’, conforming to the RBI’s Basal norms designed to scrutinise the risk exposure, better capital allocation and integration with industry. 6. Targets 750 branches by 2015. Expanding its branch network 6 folds, Report- Thoms & Reuters, July, 2009

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