Yes Bank gets battle-ready with leadership pipeline, pay reset amid SMBC deal

Yes Bank Ltd is planning changes to the compensation structure of its employees, including linking a larger chunk of their remuneration to performance, as part of a revamp ahead of Japan’s Sumitomo Mitsui Banking Corp. (SMBC) joining its cap table.

India’s sixth-largest private lender is also planning a leadership development programme to map the behavioural competencies of its seniormost executives to create a pipeline of future top bosses.

“The bank may increase the variable pay and bonus component starting with the senior leaders to make it more competitive in the banking industry," said a banking industry executive aware of the developments at Yes Bank. “The bank has given wants to give out a message that it can attract top talent and retain the existing crop as well."

The behavioural competency mapping will be limited to Yes Bank’s top layers of employees, the executive added, speaking on condition of anonymity. “The firm’s aim is to look at leadership development. They are now trying to develop talent from within," the executive said. 

In a behavioural competency mapping, a SWOT analysis is conducted to assess the strengths, weaknesses, opportunities, and threats applicable to an executive and matched with the kind of leadership the company needs.

Yes Bank did not respond to Mint's queries on the developments.

Mint reported in April that Yes Bank had revamped teams across its retail, corporate and commercial banking businesses and asked four senior officials to step down as part of an internal restructuring. Last week, SMBC announced it will acquire a 20% stake in Yes Bank for ₹13,482 crore, making it the largest cross-border investment in the Indian banking sector.

Also read | Sumitomo deal gives clarity on SBI’s stake: Yes Bank CEO Prashant Kumar

Yes Bank’s pursuit of efficiency

Yes Bank, emerging strong from a government-supported rescue in 2020, had been rewiring its teams and processes even as it began scouting for a new majority owner last year.

The lender let go of at least 500 employees in a restructuring exercise in 2024, Economic Times reported on 24 June. This year, Yes Bank has been working on cutting costs and improving its cost-to-income ratio, a metric for gauging operational efficiency, as Mint reported last month.

“They have lost some senior executives in the last one year, and while the leadership development programme and compensation changes are good measures, retaining talent will depend on how much of the programmes it can implement," said a second person aware of the developments at Yes Bank. 

Yes Bank’s cost-to-income ratio dropped to 67.3% in the fourth quarter of 2024-25 (January-March 2025) from 75.8% a year earlier. The cost-to-income ratio of India’s largest lender, HDFC Bank Ltd, was 39.8% in the March quarter, down from 41.3% a year earlier.

According to industry experts, large banks typically rotate high-performing executives through departments with a regular cadence, giving them exposure to a variety of functions and geographies and preparing them for management roles—an exercise that had been deprioritised after the 2008 global financial crisis.

An increased focus on productivity and costs post the 2008 crisis “led to sharper development of specialists, and perhaps less focus on developing general managers", said Sonal Agrawal, managing partner, Accord India, an executive search firm.

Indian banks, though, have excelled in developing functional talent and have a good pipeline of people in functions like risk, credit, and treasury, Agrawal said. “Regular talent competency assessments and reviews for risk management, pipeline building, and succession planning across industries remains critical in the BFSI (banking, financial services, and insurance) space."

Also read | Will Yes Bank’s turnaround story have a happy ending?