Large govt capex a possible saving grace for economy in FY22: Yes Bank chairman Sunil Mehta

The Indian economy is expected to face some pressure in the current financial year due to the second wave of the pandemic, coupled with weaker consumer sentiment, but a large capex by the government can be a saving grace for the economy, Yes Bank Chairman Sunil Mehta said. Large government spending may have a multiplier effect on the economy, encourage private investment and create jobs in the market, he said.
The Indian economy showed contraction by 7.3 per cent in 2020-21 due to the coronavirus pandemic and the subsequent lockdowns.

The second wave of the pandemic in the current fiscal has exerted some pressure on the economic recovery.

The Reserve Bank of India (RBI) has projected the economy to grow at 9.5 per cent in the current financial year, lower than its earlier projection of 10.5 per cent.

The International Monetary Fund (IMF) has also slashed the GDP growth projection for India to 9.5 per cent from 12.5 per cent earlier.

With continued policy support from monetary authorities and the government, the economy is expected to return to a more normal and robust growth path, Mehta said.

"A possible saving grace for the economy in FY22 will be a large budgeted capital expenditure (capex) by the central government, which is expected to unleash a multiplier effect on the economy.

"This will ultimately crowd in private investments and help revive the job market," Mehta said in his message to shareholders of Yes Bank in the annual report for FY21.

It would be equally prudent to prepare for possible weaker consumer sentiment in FY22. The economy will face some pressure to support adversely impacted unorganised, rural, MSME, and contact-intensive service sectors, among others, he said.

"Discretionary consumption could be affected as consumers, wary of possible third wave, would prefer to build up on precautionary savings," Mehta said.

Due to the impact of the pandemic on jobs, rising input costs and supply-side constraints, the RBI is expected to keep a watchful eye and monitor inflation trends, Mehta said.

"For now, the RBI is expected to lean towards boosting growth and, hence, persist with easy monetary policy," he added.

Even as the challenges remain, the circumstances are likely to have created fresh opportunities for the banking sector and it has enhanced digital footprint across all walks of human life, he said.

"Given this backdrop, Yes Bank continues to strengthen its strategic foresight and be future ready.

"We continue to closely monitor the current macroeconomic scenario and I believe that coordinated efforts, together with shareholders' support, will enable us to deliver our commitment to customers and communities," Mehta said.

Its Managing Director and CEO Prashant Kumar said Yes Bank is continuing with its transformational journey post-March 2020.

The bank has been able to demonstrate significant progress across all parameters, such as deposit growth, strong growth in retail and MSME advances.

It also successfully raised Rs 15,000 crore capital through a follow-on public offer (FPO) in July 2020 to recapitalise the bank, he said.

On the employee support, Kumar said Yes Bank is working to institute a phase-wise transition to the 'Work from Anywhere' (WFA) model to limit staff exposure on the office premises and branches.

"The WFA model, backed by infrastructure support for secure and seamless workflows, will not only provide more flexibility for our employees in planning their work routine, but also create employment opportunities for people who couldn't join a workplace due to restrictions on commuting and travelling," Kumar said.

Mehta said the bank has successfully forged the transformation from a precarious situation in March 2020, that too amid the unusual circumstances and unknown risks induced by COVID-19.

"It has successfully delivered a very robust liabilities momentum with a 55 per cent growth in deposits over the previous year. This reflects encouraging customer confidence across all segments," Mehta said.

On the asset quality front, the bank's legacy stressed book has shrunk, and the bank is well provided for with a provision coverage ratio of 79 per cent, he said.

"The management, prudently accelerated the provisioning on incremental slippages in FY21, to prevent carrying forward provisioning requirements into FY22. On the back of this, the bank posted an overall loss for FY21," Mehta said.

Yes Bank reported a net loss of Rs 3,462 crore in 2020-21.

In 2019-20, it had posted the highest-ever loss at Rs 16,418 crore, mainly because of the bank's reconstruction scheme with the change in guard and the related clean-up exercise. KPM HRS hrs