RESPONSIBLE BANKING

Business Solutions for Sustainable Development

Rita SoniCountry Head

Responsible BankingYES BANK Ltd

FINANCING A SUSTAINABLE LOW CARBON INDIAN ECONOMYAn IBA, WWF-India, TCG Initiative

13 May 2010

Mainstreaming sustainability using multi-stakeholder approach Operate in ‘Sustainability Zone’ supporting businesses that meet economic,

environmental & social objectives Innovative financial solutions to address gamut of development issues – sustainable

livelihood, food security, climate change, public health, education, information technology, biotechnology etc

Using knowledge driven approach and specialised skill sets, human resources to adapt commercial financial services to sustainability space.

YES BANK’s Sustainability Vision

YES BANK has “leapfrogged” traditional philanthropy-based CSR to Responsible Banking finding Business Solutions to Social & Environmental Issues

“Sustainability Zone” combined economic, environmental, social benefit

Pure Philanthropy

Pu

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Sustainability Zone Evolution of Sustainability

Values over Value

Sustainability: Triple Bottom Line

New Generation of Sustainability: Integration and Mainstreaming

Philanthropy focused

CSR based initiatives

Sustainability as part of business

Responsible Banking in Action

Microfinance Institutions

Group (MIG)

YES SAMPANN Direct Lending

Responsible Banking in Thought

YES COMMUNITY

Responsible Corporate

Citizenship (RCC)

Other Bank Divisions:– Corporate Finance– Corp. & Inst. Banking – Emerging Corporates– Business Banking– Retail Branches

Alternative Energy &

Environment

SocialEnterprises

SUSTAINABLE INVESTMENT BANK (SIB)Business Planning/Structuring, M&A

Advisory, Private Placement

Clean & Sustainable

Technologies

Deal Generation

Internal Engagement

Deal Generation

South Asia Clean Energy Fund

(SACEF)

MICROFINANCE Credit + Services

AGRI, RURAL & SOCIAL

BANKING (ARSB)Credit + Services

RESPONSIBLE BANKING (CSR & Sustainability)

Thought Leadership, Advisory, Institutionalization

PRIVATE EQUITY

Growth Capital

Responsible Banking Framework

• ESP addresses social & environmental considerations and includes an exhaustive list of prohibitive activities as well such as production or trade in weapons

• Embedded in Bank-wide Credit Risk Policy

• Benchmarked against key sustainability financing principles of multilateral & bilateral agencies such as the World Bank group, the Asian Development Bank and the Equator Principles • Appraisal of project

finance transactions ensures adherence to Credit Risk Policy, along with economic viability

• Enables the Bank to recognize, evaluate, and monitor, the environmental and social facets clients

• Indicative of the “walk the talk” link between the Bank’s sustainability vision and its policy & processes to substantiate this

Environment and Social Policy (ESP)

In-Principle Approval

Site Visits Annual Review Monitoring of

agreed upon norms

Project Finance Transaction Process @ YES BANK

Project Finance Transaction Process &

Select Activities

Post Disbursement Monitoring

Transaction Origination

Detailed Due Diligence

Risk Analysis

Legal Analysis Compliance Check

Syndication of Loan

Final Sanction

Financial modelling and scenario analysis

Environment Impact Study Government approvals Utilities consumption (power,

fuel etc)

Detailed technical due diligence

Environment and Social Policy review

Potential projects rejection

Adherence to laid down standards

Compliance to regulatory norms Focus on Bank’s Quality Policy Re-review of Environment and

Social Policy

Thought Leadership

CLINTON GLOBAL INITIATIVE

Corporate commitments•Education: Akanksha volunteer program

•Corporate Payroll Giving: GiveIndia program

•Microfinance

•Social Entrepreneurship: S3IDF

•Health: Malnutrition Matters and STFCL

• First Indian Bank to become a Signatory

• Emission disclosed for the year 2007-08 and 2008-09

• India Partners along with CII and WWF-India to encourage other companies for reporting

UN GLOBAL COMPACT

Only Indian Bank to be an active Signatory

• First Indian Bank to become a Signatory

• Active participation in the Global Roundtables

SELECT RESPONSIBLE BANKING INITIATIVES

Malnutrition Matters (MM)YES BANK as Technology Transfer Agent MM’s VitaGoat employs bicycle-powered

grinders and variety of locally available fuels to prepare protein-rich soy products like soy yogurt, tofu, and milk as a lower cost, nutritious alternative to milk

Results:

VitaGoat deployed at Buldana Urban Co-operative Credit Society run residential school since 2007

700 school children fed daily with soy milk/paneer 

Vigyan Ashram, MM & YBL to develop ultra low-cost soymilk system for microentrepreneurs, enabling greater outreach

Expansion to Rajasthan with the delivery of first VitaGoat to Seva Mandir in Jan 2010

Expected to serve ~300-400 people per day

Seva Mandir employee using VitaGoat to grind

Soybeans

Microfinance Institutions Group (MIG)Multiplier Effect: The Indirect Impact Institutes specific transactions to position microfinance as a new asset class,

appealing to a broad base of investors and lenders, expanding access to capital FIRST Indian bank to undertake innovations in capital market products for

microfinance:o Capital Market Products

Banks have been main source of debt funding for MFIs (term loans) Term loans are relatively expensive they are illiquid YES BANK arranged first rated bond issuance of an MFI in the world in

the form of Commercial Paper & Non-Convertible Debentures of INR 2000 mn (USD 40 mn)

Enabled cost reduction for the MFI to the extent of 300 bpso Structured Products

Securitisation of receivables originated by MFI MFI receivables recognised as an ‘asset class’ Generated interest among institutional investors

Potential incremental access to capital for industry of USD 12-14bn annually, impacting 60-70mn clients

Zameen OrganicOvercoming the ‘last mile’

YES BANK is Zameen’s Sole Banking PartnerYES BANK is Zameen’s Sole Banking Partner

Fair trade supported company owned by Small Farmers’

Organizations

Network of 6,000 small farmers producing organic cotton in the

Vidharbha (Maharashtra) and Adilabad (Andhra Pradesh) regions

Provides vital processing and marketing linkage between organic

farmers and branding companies

Unique concept of Premium: Farmer Premium and Community

Premium

Sustainable Investment BankAdvisory to SME, Social & Environment Sectors Promotes investments, provides advisory

services & facilitates growth capital for

social & environment focused enterprises

Asmitha Microfinance Ltd – raised

USD 10mn for one of top five Indian

MFI serving ~1.16 mn clients,

through private placement of equity

Gradatim IT Ventures - raised USD

3mn growth capital enabling MFI

access to technological interventions

that increase operational efficiencies

and reduce costs

Responsible BankingBusiness Results

ONLY private sector bank to consistently exceed RBI’s PSL targets (in terms of agriculture specific and overall targets) over the last three years (Source: RB Portfolio comparison using RBI data)

Consistently maintained ZERO non-performing assets (NPAs) in RB portfolio which is generally 12-13% at other banks (Source: RBI data)

Tracks at 43% of loans & advances; growth of 34% of interest income

Growth in both absolute & percentage terms from FY08

With MIG portfolio of USD 100mn reaching 1.4mn individuals, microfinance constitutes 11.07% of RB portfolio – highest among Indian commercial banks; next highest, ING at 7.55% (Source: Bank analysis of MF Sector, using data from ACCESS Development Services & RBI)

Despite Bank’s limited rural presence, ARSB reached 1.3mn farmers; 25% growth year on year with portfolio of USD 547mn.

SIB generated fee income of 2.5x cover on costs, institutionalizing revenue stream where none existed

Quality of Assets Size of Business

Thank You!