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Sunday, September 23, 2012

Yes Bank expects cut in CRR, SLR to improve interest margins

Private sector player Yes Bank is expecting its net interest margin (NIM) to improve by about 0.20 per cent following reduction in cash reserve ratio and statutory liquidity ratio announced by the Reserve Bank.

"The SLR and CRR reductions are going to benefit most banks, including us. I do expect our NIM which is 2.8 per cent at present and which has been fairly steady over the last 6-9 quarters, will improve to a level of 3 per cent by end of FY13," the bank's founder, Managing Director and Chief

Executive Rana Kapoor said. In the last two months, RBI has announced 2 percentage point reduction in the SLR, or the amount of deposits to be parked in government securities, to 23 per cent. It was followed by a 0.25 percent cut in the CRR or the amount of deposits to be kept with RBI to 4.5 per cent.

Both the liquidity-infusing measures are expected to make additional money available for lending.

Banks do not earn any interest on CRR, while the return on the SLR through investments in the low-risk government securities is less than what they would earn by lending. Reacting to the SLR cut, country's largest lender State Bank of India first announced a contraction in spreads in select loan categories like small businesses, housing and auto, while the CRR cut prompted it to cut the base rate or the minimum rate of lending by an equal measure last week. SBI's competition is yet to react to its base rate cut announcement.

Meanwhile, Kapoor said the bank is targeting to grow its credit by over 26 per cent and deposits by 18 per cent during the year.

When asked about concerns over the asset quality, given the gloomy economic conditions, Kapoor said banks need to be cautious and use the opportunity to introspect and build the right kind of internal systems.

On the rise in debt restructuring, he cautioned that it should be done with a clear objective and not be misused. When asked about reports of Yes Bank thinking to exit corporate debt restructuring (CDR) cell, Kapoor said, "We are a medium-sized bank and our presence or lack of it will not make a difference in the CDR forum".

Source: Financial Express


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