Yes Bank is a leading new age private sector bank in India. Following a knowledge driven approach, the bank focuses particularly on the future industries of India. What differentiates it from other commercial banks is its responsible banking. Yes Bank is the first Indian bank to join the United Nations Environment Programme-Financial Initiative (UNEP-FI), Carbon Disclosure Project (CDP) and UN Global Compact. Rana Kapoor, MD & CEO, explains in an email interview to FE’s Rajiv Tikoo the rationale behind the banks sustainability approach and how it makes business sense. Excerpts:
BusinessWeek has ranked Yes Bank among world’s 25 unsung innovative companies. What does it mean to you?
It is a privilege for Yes Bank to receive this prestigious international recognition. This acknowledgement reinforces our commitment to introduce innovations in Indian banking. In a short span of five years, Yes Bank has invested significantly in world-class creative technologies and processes, thus ensuring our customers benefit from a superior service experience. Yes Banks knowledge banking approach of focusing on future industries of India with our money doctor methodology of diagnostic and prescriptive solutions; and the responsible banking initiatives of focusing on sustainability as one of the key business drivers, are significant innovations in Indian banking.
What is it that differentiates you from other responsible banks?
A major differentiator for Yes Bank is its vision to champion responsible banking in India, where the concepts of corporate social responsibility (CSR) and sustainability are integral parts of our corporate strategy. We have an innovative business model entailing a conscious move away from philanthropy-based CSR to making sustainability a differentiating business driver.
What is it that has led you on the responsibility path?
The Yes Bank vision and strategy integrates fully with our responsibility path. As India takes a prominent position in the global economy, what emerges is the integration of business practices with critical social and environmental issues, where the financial sector acts as a catalyst for positive change and development. Grassroots initiatives coupled with rapid economic advances have encouraged the growth of a concerted, collective awareness towards ecological and social sustainability, thus redefining CSR into a more holistic and participative practice. Yes Bank has championed community initiatives through Yes Bank, where a bank branch acts as an ideation and action ground, and catalyst for social change in the urban renewal model.
How important is the responsibility factor on the agenda when you engage with clients?
Responsible banking is a proactive response to the continuously evolving Indian economic scenario where there is an overarching focus on developing innovative business solutions for social and environmental challenges. The idea is to not only promote financial growth, but to do so by being selective and investing in businesses that are socially and environmentally responsible by engaging with investors who share similar values.
Responsible banking at Yes Bank takes pride in scrutinising our business activities using a compliant environmental and social policy (ESP) based on international norms. Due diligence is done to ensure that we do not support businesses that engage in illegal, unethical and environmentally unsustainable practices like child labour, irresponsible mining, unsustainable logging and land impingement. The lending approved memorandum not only contains these restrictions on the type of businesses and nature of their activities, but also includes potential financial penalties upon breach of contract and as an ultimate safeguard weapon allows the bank to recall financing in case of severe and continued breach. These policies did not arise out of an external obligation, but an internal commitment and Yes Banks success is testimony that doing principle-based business need not adversely impact financial viability.
Responsible businesses begin with a disadvantage in a business-as-usual world. Do you factor it in when dealing with them?
I would like to believe that the opportunities in sustainability and doing business responsibly are everywhere. Yes Bank focuses on strong due diligence procedures, laying emphasis on understanding the nature of businesses in intricate detail like past financial performance, processes, market share and business potential. If the company has an outstanding ethical record or creates an innovative product that is socially/environmentally sustainable, it certainly goes in favour of the business when Yes Bank makes decisions towards extending debt and/or raising equity. Global concerns like climate change and social justice are real and cannot be ignored. Therefore, Yes Bank strongly believes that companies with ethical products, environmentally friendly practices, codes of conduct, efficient internal and external processes are the businesses of the future.
Do you also lose business by putting a premium on responsibility when most other banks don’t?
I believe that we actually gain business opportunities that others are missing by putting a premium on responsibility. Yes Banks stellar growth over the last five years is an affirmation of our strong beliefs and commitments to the social and environmental development of India. By placing a premium on responsibility, Yes Bank has become the reference bank for sustainability in India today for businesses that share our ethics and values.
You are a signatory to UNEP-FI and CDP. How does it help you?
We are the first Indian bank to sign UNEP-FIs Principles of Sustainability and the first Indian signatory to the CDP. Recently, we became the first Indian bank to sign onto the United Nation’s Global Compact with a particular interest in sustainability reporting. Independently, Yes Bank has played an important and proactive role in sustainable development, and has been partnering several international sustainability forums across the world in association with NGOs, social businesses, academia and the government of India to promote and further the principles of sustainability as we believe that sustainability services will increasingly become a critical component of the banking portfolio of services.
At the end of the day, is responsibility good business for the bank How does it reflect in the bank financials?
Responsibility makes great business sense for Yes Bank in three distinct ways. Approximately 25% of our business comes directly from the responsible banking business verticals. Going beyond financial reflections on our balance sheet, we also recognise the intangible returns and profitability resulting from our strict due diligence and responsible lending procedures, thus ensuring the highest quality assets and the lowest NPA percentage in the industry.
Responsibility is not just about impressive businesses, we are also imbibing it in our day-to-day operational practices. Yes Bank has reduced operating expenses significantly through our several cost savings and efficiency initiatives like switching off lights and computers, minimising paper consumption etc. Hence, being responsible internally and externally is becoming the smartest way to do business in the 21st century.
Source: The Financial Express
Published on 25 May 2009