Yes Bank has outlined a plan to close its non-performing branches and ATMs. They have also planned to narrow the office space by fixing a revolving desk layout and renegotiate contracts with vendors, landlords, and contractors. All these plans were part of their intention to cut costs and save up to Rs 600 crore in this financial year. The cost savings will straight away go into the bank’s bottom line to make the profit more sustainable.
In the quarter ended September, the Yes Bank had reshaped 35 rural branches into low-cost business correspondent centres to reduce the total operating expense by 21%, thus contributing to its profit. As a continuation, currently, the bank had found 50 more branches to merge ultimately to minimize them by 25. They are preparing a work-from-home model that free up the office space and help them to save the rentals. They had also identified a revolving desk where the employees can come and work. With this arrangement, the bank is planning to work with 30-32% of employees in the office which will help them to trim their rental expenses to an extent.
Cost reduction plans of Yes Bank include renegotiating real estate rentals and contracts with vendors. About 50 non-performing offsite ATMs are identified for closure. The plan of action initiated this year had resulted in reducing the bank’s cost to income ratio at 49.3%, the lowest rate in five quarters.
The Yes Bank is not much sure about the overdue loans which are to be restructured post COVID-19. They had identified Rs 9,000 crore of loans for which repayment has been affected due to the pandemic. For these loans, there are three chances: some of it may be upgraded, some may need restructuring and some others may fall into Non-Performing Assets (NPA). Among them Rs 2,000 crore are loans to real estate and Rs 1,700 crore is to the hospitality sector which is the two largest segments.
The bank expects to increase deposits by 50% in this fiscal year led by retail deposits. They had also charted to shift its NPA and overdue accounts totaling Rs 50,000 crore to a bad bank outside it. This course of action will provide ample time for the management to focus on the performing assets and save equity capital in the future.