Yes Bank is experimenting with creating 'business cases' out of new projects under the aegis of mandatory corporate social responsibility.
The Mumbai-based bank , which trails peers such as HDFC and ICICI in size, has embarked on activities under the umbrella of corporate social responsibility that can be taken ahead to increase involvement with lending activity and borrower engagement.
Banks have to adhere to the requirements of Clause 135 of The Companies Bill 2012 and constitute a board-level Corporate Social Responsibility Committee.
HDFC and other banking peers are doing this, but Yes Bank is trying to go beyond. All projects financed by HDFC's Corporate Banking Group (for amounts greater than Rs 10 crore and for a period of more than 5 years) are put through the Social and Environmental Risk Management Systems before they are approved, according to the bank's Annual Business Responsibility Report.
At Yes Bank, the vertical that deals with lending to alternative energy companies is gauging the feasibility of considering grant by alternative energy agencies as a risk guarantee, Namita Vikas, country head and president, responsible banking, said.
The way it works is, most international agencies will have a grant of, say, Rs 1 crore, that they generally give to one or two companies. Yes Bank is proposing that it will put in some amount of money along with the grant, and the corpus will be used as risk guarantee. The bank will then be able to lend to a larger number of power projects. This way, the bank widens its number of clients, and the more the number of clients, the less the chance of losing money if one or two clients fail. Vikas is currently working with international agencies such as the International Finance Corporation (IFC) and USAID to tie up the backend before financing projects.
Yes Bank has a total corporate loan portfolio of about Rs 31,960 crore.
The bank is already working with Mahindra & Mahindra , and CLP India, which has invested close to Rs 14,500 crore in India's power sector on sustainability-related projects.
While a strong environment and sustainability (E&S) record is good for the management stakeholder relationship, a badly implemented policy is increasingly becoming a reputational risk. "The masala lies in one thing, how you would put this in practice, and not in ticking the boxes," says Sumantra Sen, founder & CEO, RIRA, a non-profit organisation, adding that Yes Bank has a more structured policy than many other banks.
Other initiatives ensure that the goal of reaching certain target groups and partners is met. For example, the bank's association with HelpAge India for World Population Day was part of its launch of Yes Respect, a boutique of products and services aimed at senior citizens, Vikas said. Senior citizens are a target group for the bank.
In Yes Bank's case, senior citizens around the branches who participated in the event were able to meet representatives of the NGO, to know about its products and services, which are separate from those of the bank. Senior citizens are a target group for the bank. This provides the NGO with an added incentive to be associated with the event.
Yes Bank is also considering a training programme for independent directors to train them for sustainability and responsible banking in collaboration with the Indian Institute of Corporate Affairs, said Vikas, who joined in mid-2012 and leads a team of about 20 people in the bank.