The agency has also upgraded the bank’s baseline credit assessment (BCA) to 'ba3’ from 'b1’. It has changed the rating outlooks to ‘stable’ from ‘positive’.
Moody's Ratings said that the upgrade of Yes Bank's ratings and BCA is driven by a gradual improvement in the bank's credit profile including its capital and loan loss reserves which will provide sufficient buffers against the bank's unseasoned asset risks and improving yet modest profitability and funding.
Yes Bank's Ba2 deposit ratings are one notch above its ba3 BCA based on our expectation of a moderate likelihood of support from the Government of India (Baa3 stable) in times of need.
The bank's gross non-performing loan (NPL) ratio declined to 1.6% as of March 2025 from 13.9% in March 2022. Reported provision coverage as a proportion of NPL increased to 80% from 71% during this period.
Despite these improvements, Yes Bank's asset quality remains exposed to unseasoned risks associated with the rapid expansion in its retail and small & medium enterprise portfolios, its increased focus into higher-risk retail segments, and reliance on third-party sourcing channels.
The bank's Common Equity Tier-1 (CET-1) capital ratio on a standalone basis improved to 13.5% as of the end of March 2025 from 12.2% a year earlier following the exercise of equity share warrants during the year.
In May 2025 Sumitomo Mitsui Banking Corporation (SMBC) announced that it will acquire a 20% stake in Yes Bank from existing shareholders. The planned acquisition is credit positive for Yes Bank because it brings in a long-term strategic partner, with a strong balance sheet and funding capacity to support its growth.
However, with a 20% stake, we expect that SMBC's influence will be limited and consequently we do not plan to factor in affiliate support in the bank's rating after completion of the transaction.
The bank's efforts to reduce deposit costs and increasing lending to higher yielding, albeit higher-risk retail and small and medium enterprise segments and will help maintain its net interest margins despite the significant decline in policy rates in India over the past few months.
Continued improvement in the bank's ability to meet the central bank's priority sector lending norms will also support its profitability. Yes Bank's profitability is weaker than Indian peers we rate and remains the banks' key credit challenge.
The bank's funding has gradually improved with higher share of low cost current and savings deposits and retail term deposits which increased to 51% of its total deposits at the end of March 2025 from 41% as of the end of March 2021.
Yes Bank is private sector bank that is headquartered in Mumbai. The bank had reported consolidated assets of Rs 4,24,100 crore as of 31 March 2025.
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