Yes Bank plans to scale up its investments for the educational infrastructure sector to Rs 5,000 crore over the next four years. The bank's present investment in the sector stands at about Rs 500 crore, according to its Managing Director and Chief Executive Officer, Mr Rana Kapoor.

“Educational infrastructure is a great opportunity and we want it to account for about five per cent of our total loan book by 2015. It currently accounts for less than one per cent of our total exposure,” Mr Kapoor told newspersons at a press meet on the occasion of the launch of its new branch here on Saturday.

The payback period on such investments was typically in the range of three-four years, against 11-12 years in a normal infrastructure lending, he pointed out.

Sectors such as education, hospitality and healthcare have been witnessing a boom. “Education offers tremendous potential and we should invest in educational institutions whether private or in the PPP (public-private partnership) model,” he said.

MFI exposure

Yes Bank, Mr Kapoor said, would also increase its exposure to the MFI (microfinance institution) sector to about Rs 1,500 crore (less than Rs 300 crore as on March 31, 2011) over the next one year.

“The delivery model of MFIs is far superior and banks should invest in MFIs. People from my bank went to Andhra Pradesh to get a feel of the industry and our inference is that borrowers want to repay and re-borrow. We will lend to MFIs across the country,” he said.

Interest rates have peaked and there might be no need for further tinkering in rates, he pointed out. “We are almost at the fag end of the interest rate cycle. If at all a rate hike is necessitated then it could be in the range of 25-50 basis points. It, however, looks unlikely,” he added. Inflation would stabilise to 7-7.5 per cent by October-November.

Interest rates on the savings bank deposits should be deregulated to encourage more number of people to park their funds. “We must deregulate savings rate to make it attractive enough to bring in savings of the unbanked population into the banking system,” he said, and added that close to 50 per cent of the country's total unbanked population could come into the banking system if rates were deregulated.

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