YES Bank Aims for 1% ROA by FY26: Is India's Most Dramatic Banking Comeback Finally Complete?
YES Bank was frozen overnight in 2020 — depositors locked out, futures uncertain. Now, its CFO is quietly confirming a 1% ROA by FY26 exit. What changed? A Japanese banking giant, record-low NPAs, and a CEO calling it a “breakthrough quarter.” India’s most unlikely comeback just got very real.
There is something uniquely Indian about the YES Bank story. A bank that collapsed so spectacularly in March 2020 that the Reserve Bank of India had to impose a moratorium overnight, freezing millions of depositors in a panic — is now calmly discussing 1% Return on Assets (ROA) targets with institutional investors and logging a 55% year-on-year profit jump. If that isn’t a comeback worth watching, nothing in Indian banking is.
On February 22, 2026, YES Bank’s Chief Financial Officer Niranjan Banodkar confirmed to PTI what many analysts had cautiously hoped: the bank will exit FY26 with an ROA of 1%, and on an annual basis, that figure will exceed 1% in FY27. For a bank that was posting negligible returns just two years ago, this milestone is not just a number — it is a statement of survival, restructuring, and resurgence.
What Is ROA and Why Does 1% Matter So Much?
Before diving deeper, let us quickly demystify the metric at the centre of this story. Return on Assets (ROA) measures how efficiently a bank generates profit from the total assets it holds — loans given, investments made, and reserves maintained. A higher ROA means a bank is doing more with its money. For Indian private sector banks, an ROA between 1.5% and 2% is considered healthy. ICICI Bank, for instance, runs at around 2.2%, and HDFC Bank hovers near 1.8%.
For YES Bank, the journey to even 1% has been long and painful. The bank was reporting an ROA of just 0.5% a year ago. By the first quarter of FY26 (April–June 2025), it improved to 0.8%. The December 2025 quarter (Q3 FY26) saw the bank touch 0.9%, and when adjusted for a one-time gratuity provision impact, the annualised ROA for that quarter actually hit 1.0% — a level not seen since the bank’s reconstruction in 2020.
The CFO’s latest confirmation essentially tells investors: what was a breakthrough moment in Q3 is now becoming a baseline.
The Numbers Behind the Narrative
The Q3 FY26 results were genuinely striking. YES Bank's standalone net profit surged 55.4% year-on-year to ₹951.62 crore — the highest quarterly profit since its restructuring. Profit before tax rose 14.3% to ₹1,234 crore.
But a single quarter of strong profit can always be dismissed as noise. What makes YES Bank's case more compelling is the consistency in the supporting metrics:
Net Interest Margin (NIM): The bank has sustained a NIM of 2.5% across recent quarters, supported by lower RIDF (Rural Infrastructure Development Fund) balances and deposit rate repricing. While this NIM still lags the 3%+ that top private banks report, the trajectory is upward.
Asset Quality: This is arguably the most significant part of the YES Bank story. The gross NPA ratio stood at just 1.6% as of Q3 FY26, while net NPA was at 0.3%. For a bank whose NPA crisis was the very reason it collapsed, maintaining these levels represents a fundamental transformation.
CASA Ratio: Current Account Savings Account deposits hit 33.7% in Q2 FY26, rising 170 basis points year-on-year. This is critical because CASA is essentially low-cost funding — the higher the CASA ratio, the cheaper the bank's cost of funds, and the better its margins.
Operating Profit Growth: Operating profit for Q3 FY26 grew at a healthy pace, driven by fee income, cost control, and NIM improvement. The bank's cost-to-income ratio has been steadily declining.
Capital Adequacy: The CET1 ratio (a measure of financial stability) was at 13.9% as of September 2025, comfortably above the regulatory minimum and better than several peers.
The SMBC Factor: A Game-Changer That Changed Everything
No discussion of YES Bank's recovery is complete without acknowledging the Sumitomo Mitsui Banking Corporation (SMBC) story. Japan's third-largest bank acquired a 24.9% stake in YES Bank for approximately ₹16,000 crore, making it the single largest shareholder. Two SMBC-nominated directors — Shinichiro Nishino and Rajeev V. Kannan — now sit on the board.
This was not just a capital infusion. SMBC's entry sent a powerful signal to global and domestic investors: a credible, conservative Japanese institution with a 140-year history had done its due diligence and chosen to bet on YES Bank's future. Rating agencies responded almost immediately. Moody's upgraded YES Bank's long-term issuer rating from Ba3 to Ba2, while CARE and ICRA both upgraded the bank's long-term rating to AA- — a meaningful vote of confidence.
The CFO himself acknowledged the strategic opportunity SMBC brings: "Do we take growth higher or do we accelerate profitability... those are the nuances which we will try and balance in the next few months." That is a fundamentally different kind of problem from the ones YES Bank was solving just three years ago.
Clearing the Legacy Debris: The PSL and RIDF Overhang
One of the most technical but important drivers of YES Bank's profitability improvement has been the resolution of its legacy Priority Sector Lending (PSL) shortfalls.
For years, YES Bank had failed to meet RBI's PSL targets — the requirement that banks lend a certain percentage of their advances to sectors like agriculture, small businesses, and weaker sections. As a penalty, the bank was forced to park funds in the Rural Infrastructure Development Fund (RIDF), a low-yielding instrument operated by NABARD. At its peak, RIDF balances accounted for 11% of the bank's total assets — a significant drag on yields.
The bank has steadily reduced this to around 6.9% and is targeting below 5% by FY27. As these low-yielding assets mature, the freed-up funds will be redeployed into higher-yielding retail and MSME loans — directly lifting ROA. Since FY24, YES Bank has maintained 100% compliance across all PSL subcategories, meaning no new RIDF burden is being added. This is a structural improvement, not a one-off benefit.
Growth Strategy: 15% Expansion Anchored on Retail
Beyond the profitability metrics, YES Bank has articulated a clear growth ambition. The bank aims to sustain approximately 15% growth annually in its balance sheet. Net advances crossed the ₹2.5 lakh crore milestone in Q2 FY26, growing 6.4% year-on-year. The bank opened 80 new branches in FY26, expanding its retail reach.
The growth strategy is deliberately retail-heavy. Retail advances account for roughly 49% of net advances, and the bank recorded around 20% quarter-on-quarter growth in retail disbursements in Q2 FY26. This is important because retail loans typically carry higher yields than corporate loans, directly supporting NIM and ROA improvement.
Additionally, YES Bank has been acquiring over 1 million new CASA customers per year, strengthening its low-cost deposit base — a virtuous cycle that supports both growth and profitability.
The Honest Caveats: What Analysts Are Watching
To its credit, the market is not giving YES Bank a blind pass. Several brokerages have maintained cautious ratings even as they acknowledge the turnaround.
Emkay Global has noted that despite the improving earnings trajectory, credit growth remains slow at around 5–6% YoY versus peers growing at 12–15%. The NIM of 2.5% is still well below the 3%–3.5% that top private banks report, which limits absolute profitability.
The 1% ROA target, while a milestone for YES Bank, still trails the industry average for private banks, which has ranged between 1.53% and 1.87% in recent years. This means YES Bank is closing the gap but has not yet reached parity.
There is also the question of sustained execution. YES Bank has had targets before. What gives management credibility this time is the consecutive quarters of delivered improvement — not a single quarter of flattering numbers, but a multi-quarter trend with improving fundamentals across the board.
What This Means for Investors and Depositors
For retail investors holding YES Bank shares — currently trading around ₹21, with a market cap of approximately ₹66,000 crore — the 1% ROA milestone is significant. It validates the turnaround thesis and sets the stage for re-rating as the bank approaches and exceeds peer-level profitability.
For depositors, the story is simpler but equally reassuring. The bank's capital adequacy is strong, its asset quality is at multi-year bests, credit rating agencies have upgraded their outlook, and a blue-chip global institution now holds the largest stake. The existential risks that scared depositors in 2020 are structurally addressed.
MD and CEO Prashant Kumar described Q3 FY26 as a "breakthrough quarter" — attributing it to an "excellent combination of quick profitability, improved asset quality, increasing business volumes, and leading the industry in CASA growth." That combination, sustained over time, is what transforms a recovery story into a growth story.
The Bigger Picture: A Lesson in Institutional Resilience
The YES Bank turnaround is, in many ways, a testament to what Indian banking regulators and institutions can achieve when they act decisively. The RBI's intervention in 2020 was controversial but ultimately effective. The SBI-led reconstruction plan bought the bank time. Management, capital, and strategy did the rest.
As FY26 draws to a close, YES Bank is no longer a cautionary tale. It is becoming, quietly and steadily, one of Indian banking's more remarkable second-act stories.
Whether the 1% ROA target is hit precisely at the close of FY26 or inches into FY27 matters less than the direction of travel — which, by every measurable metric today, points firmly upward.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Please consult a registered financial advisor before making investment decisions. Stock prices and financial metrics cited are as of February 2026.
