The CEO of Yes Bank, Prashant Kumar, believes that consolidation is necessary in the private banking sector. Smaller banks are struggling to compete due to increasing technology and compliance costs. Kumar points out that larger banks have already benefited from consolidation in the public sector.
In 2020, the government merged several public sector banks to create bigger ones with a balance sheet of over ₹8 lakh crore. This consolidation aimed to achieve a scale comparable to global banks and bring cost benefits through synergy. Kumar suggests that the private banking sector should follow a similar path, with banks aiming for a balance sheet size of over ₹5 lakh crore to better handle unexpected situations like the COVID-19 pandemic.
Yes Bank is now open to acquisitions after completing its turnaround and focusing on growth. It plans to acquire a microfinance institution to build a portfolio of high-yielding assets. Reports indicate that the bank is in discussions with Kedaara Capital to acquire a stake in Spandana Sphoorty. While Yes Bank’s current balance sheet is around ₹3 lakh crore, it aims to become bigger.
Kumar explains that their immediate challenge is private sector lending and the lack of high-yielding assets. Acquiring a microfinance institution would address both issues, supporting their lending needs and providing a high-yielding asset. However, while open to inorganic growth, Yes Bank is not yet ready to merge with a larger bank. Kumar believes that their strength lies in their franchise and building capabilities in management and digital areas, rather than becoming a target for acquisition.