Yes Bank is exploring microfinance acquisitions to boost its portfolio as it aims for a 20 basis point improvement in core return on assets by FY27. The bank is also seeing increased demand for products linked to FCNR(B) deposits following recent regulatory changes.
Yes Bank is signaling a strategic shift toward the microfinance segment as it seeks to improve long-term profitability. During the earnings call for the June quarter of fiscal year 2027, the bank’s Chief Financial Officer Niranjan Banodkar confirmed that the lender is evaluating potential acquisitions in the microfinance industry. While the bank is actively considering inorganic growth options, management clarified that there are no immediate deals currently in the pipeline.
The interest in microfinance comes as the sector faces stricter regulatory oversight. Yes Bank management believes that its existing infrastructure and risk management systems can be effectively scaled by integrating established microfinance players. This move aligns with the bank's broader goal of improving its core return on assets by 20 basis points by the end of fiscal year 2027.
The bank reported a core return on assets of approximately 92 basis points for the quarter ending June 2026. This figure represented a slight decline compared to the previous quarter, which management described as a result of seasonal business cycles rather than a structural issue. Investors should note that the bank's total reported return on assets can often fluctuate due to gains or losses in its bond treasury portfolio, making the core return on assets a more direct measure of its operational efficiency.
In addition to the microfinance push, the bank is seeing initial success with products tied to FCNR(B) deposits. These are foreign currency non-resident bank deposits that allow non-resident Indians to park their foreign currency earnings in Indian banks. Recent changes by the Reserve Bank of India now permit banks to offer leverage against these deposits. Yes Bank has started offering leverage of up to nine times for specific clients. While this has attracted interest, the bank is adopting a measured approach to scaling this segment due to evolving industry demand and the need to manage internal market limits carefully.
The bank’s corporate lending business also showed growth during the quarter, with demand coming from sectors like oil and metals. A strategic partnership with Japan-based Sumitomo Mitsui Banking Corporation is also helping the bank deepen its relationships with large corporate clients. As the bank continues to execute its strategy, investors may monitor the progress of its senior leadership appointments, which are expected to be finalized in the coming weeks. The primary monitorables moving forward will be the bank's ability to maintain its loan growth momentum and whether it can successfully execute its core return on assets targets amidst fluctuating treasury income.