Yes Bank Limited. Update to credit analysis. Rating Scorecard - Key financial ratios 0% CLIENT SERVICES

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1 CREDIT OPINION 16 January 218 Yes Bank Limited Update to credit analysis Update Summary Yes Bank Limited's (Yes Bank) Baa3/Prime-3 foreign-currency deposit ratings are underpinned by the bank's Baseline Credit Assessment (BCA) of and one notch of government support uplift. Yes Bank's BCA of reflects the bank's consistent profitability and small but rapidly growing franchise compared with those of its Indian banking sector peers. RATINGS Yes Bank Limited Domicile India Long Term Debt (P)Baa3 Type Senior Unsecured MTN - Fgn Curr Outlook Not Assigned Long Term Deposit Baa3 Type LT Bank Deposits - Fgn Curr Outlook Stable Please see the ratings section at the end of this report for more information. The ratings and outlook shown reflect information as of the publication date. Yes Bank's asset quality remained fairly resilient compared with that of other Indian banks, but slippages have increased in recent quarters, with the gross nonperforming loan (NPL) ratio increasing to 1.82% as of the end of September 217 from.83% a year earlier. As of the end of September 217, the bank's reported Common Equity Tier 1 (CET1) capital ratio improved to 11.4% from 9.7% a year ago on the back of a INR49 billion ($75 million) capital raise via a qualified institutional placement conducted in March 217. Yes Bank's BCA also reflects its comparatively weaker, but improving, funding profile. The bank's loan/deposit ratio was high at 94.1% as of the end of September 217. While the bank's current level of current account and savings account (CASA) deposits remains below the rated private sector bank average of 46.9%, it has been building up its deposit base, as well as increasing its branch network. The bank's CASA ratio improved to 37.2% as of the end of September 217 from 3.3% a year ago. As of the end of September 217, the bank's network consisted of 1,4 branches. Contacts Gene Fang Associate Managing Director gene.fang@moodys.com Rating Scorecard - Key financial ratios Yes Bank Limited (BCA: ) Median -rated banks 14% 35% 12% 3% 1% 25% 8% 2% 6% 15% 4% 1% 2% 5% 1.5% 1.8% 1.5% 15.9% 25.8% Asset Risk: Problem Loans/ Gross Loans Capital: Tangible Common Equity/Risk-Weighted Assets Profitability: Net Income/ Tangible Assets Funding Structure: Market Funds/ Tangible Banking Assets Liquid Resources: Liquid Banking Assets/Tangible Banking Assets % CLIENT SERVICES Americas Asia Pacific Japan EMEA % Solvency Factors (LHS) Source: Moody's Financial Metrics Liquidity Factors (RHS) Liquidity Factors Srikanth Vadlamani VP-Sr Credit Officer srikanth.vadlamani@moodys.com Exhibit 1 Solvency Factors Alka Anbarasu VP-Senior Analyst alka.anbarasu@moodys.com

2 Credit strengths» High profitability and focus on efficiency» Adequate capitalization levels and loan loss reserves» Moderate probability of government support, resulting in one notch of uplift from its BCA for deposits Credit challenges» Above-industry-average growth has resulted in a deterioration the bank's asset quality in the last one year» Higher dependence on corporate deposits than that of its peers, but with a growing retail deposit base Outlook Yes Bank's deposit rating has a stable outlook. The bank's BCA incorporates our expectation of relative stability in its fundamentals, and we do not expect to raise the BCA over the medium term. Factors that could lead to an upgrade Upward pressure on the BCA could develop if (1) Yes Bank maintains its current asset-quality ratios while reducing its credit risk concentration to large borrowers; (2) the bank's funding profile improves, for example, by growing its proportion of CASA/total deposits to be in line with the industry average, without adversely affecting its net interest margin; and (3) the bank sustains its profitability and maintains adequate loss-absorbing buffers. Factors that could lead to a downgrade A downward revision of the sovereign rating could also lead to a downgrade in Yes Bank's deposit rating. Downward pressure on the bank's BCA could develop from (1) a sustained deterioration in impaired loans or loan-loss reserves, or if the rate of new NPL formation is significantly higher than previously experienced; or (2) a decline in earnings, which would lead to a significant decrease in internal capital generation. This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on for the most updated credit rating action information and rating history January 218

3 Key indicators Exhibit 2 Yes Bank Limited (Unconsolidated Financials) [1] Total Assets (INR billion) Total Assets (USD billion) Tangible Common Equity (INR billion) Tangible Common Equity (USD billion) Problem Loans / Gross Loans (%) Tangible Common Equity / Risk Weighted Assets (%) Problem Loans / (Tangible Common Equity + Loan Loss Reserve) (%) Net Interest Margin (%) PPI / Average RWA (%) Net Income / Tangible Assets (%) Cost / Income Ratio (%) Market Funds / Tangible Banking Assets (%) Liquid Banking Assets / Tangible Banking Assets (%) Gross Loans / Due to Customers (%) , , , , CAGR/Avg [1] All figures and ratios are adjusted using Moody's standard adjustments [2] Basel III - fully-loaded or transitional phase-in; LOCAL GAAP [3] Basel II; LOCAL GAAP [4] May include rounding differences due to scale of reported amounts [5] Compound Annual Growth Rate (%) based on time period presented for the latest accounting regime [6] Simple average of periods presented for the latest accounting regime. [7] Simple average of Basel III periods presented Source: Moody's Financial Metrics Profile Yes Bank Limited is a publicly listed commercial bank operating in India. The bank provides retail and corporate banking services to individuals, large and medium-sized companies, financial institutions, central and state government agencies, and small businesses through a nationwide network of 1,4 branches and 1,823 Automated Teller Machines (ATMs) and Bank Note Acceptors (BNAs) as of 3 September 217. Incorporated by Mr. Rana Kapoor and late Mr. Ashok Kapur in November 23, Yes Bank was awarded a banking license in May 24. As of 31 March 217, the Promoter and Promoter group collectively owned 2.19% of the bank s total share capital. Detailed credit considerations Asset-quality metrics are better than most other rated Indian banks; but above-industry-average growth has resulted in a deterioration in these metrics in the last one year Yes Bank's asset quality has deteriorated in the last one year, with its gross NPL ratio increasing to 1.82% as of the end of September 217 from.83% a year earlier. In addition, the bank's net NPL formation rate (measured as slippages less upgradation and recoveries as a percentage of gross loans) increased to 1.6% of gross loans in financial year ended March 217 (fiscal 217) from.7% a year earlier. Nevertheless, the bank's asset-quality metrics are better than most other rated Indian banks. Recently, in October 217, Yes Bank reported a divergence observed by the Reserve Bank of India (RBI) in its asset-quality classification for fiscal 217. The divergence amounted to INR63.5 billion ($1. billion) and represents 4.8% of the bank s gross loans as of 31 March 217. Nevertheless, the bank has managed to resolve a number of those accounts identified by the RBI, and, therefore, the reported NPL ratio of 1.82% as of September 217 took into account the impact of the divergence. As a result, the bank's annualized net NPL formation rate for the first half ended 3 September 217 was 1.% of gross loans. We expect downside risks to Yes Bank's asset quality, given:» the pressure faced by Indian corporates owing to their weak debt-servicing metrics, which has resulted in the asset-quality stress in the Indian banking system. Corporate sector accounts for 67% of Yes Bank's loans as of September 217. The bank has somewhat mitigated this risk by limiting its exposure to stressed sectors such as infrastructure lending, structuring loans to secure cash flow and prioritizing loans for working capital to provide more control over borrowers' liquidity situations January 218

4 » the relatively unseasoned nature of the bank's loan book. Yes Bank s credit growth significantly trended above the industry averageof 1% with average growth of 28% over the last five years. While this growth comes from a small base, nevertheless, this fast pace of growth could expose the bank to downside risks. Furthermore, restructured loans, including those under a strategic debt restructuring scheme for sustainable debt restructuring (S4A), as well as standard restructured loans, represent a potential source of asset-quality stress for the bank. Taking into account NPLs and restructured loans, Yes Bank's stressed assets ratio was 3.3% at the end of September 217. Yes Bank continues to increase granularity in its loan exposure and reduce its concentration to large groups. The top 2 exposures represented 145% of the bank s Tier 1 capital as of March 217. Single-name concentration declined from close to 2% in March 215 and March 216, given the bank raised capital in 216 and again in March 217. We have adjusted the bank's Asset Risk score to to reflect the above-mentioned factors. Adequate capitalization, but capital consumption remains high in light of rapid loan growth Although Yes Bank's level of capital supports its rating, the bank's capital is consumed quickly by its rapid expansion. As of the end of September 217, the bank's reported CET1 capital ratio increased to 11.4% from 9.7% a year ago on the back of new capital raised via a qualified institutional placement amounting to INR49 billion in March 217. In addition, the banks' ratio of tangible common equity to adjusted risk-weighted assets (TCE/RWA) improved to 1.8% as of the end of March 217 from 9.2% a year earlier. In line with our global standard adjustment, we apply a 5% risk weighting on Indian government securities held by the bank, which results in higher RWA and lower adjusted capital ratios than those reported by the bank. Nevertheless, we expect the bank's TCE/RWA to decline by about 12 basis points-13 basis points (bps) over the next year. This forecast assumes RWA growth of about 25%-3%, in line with the growth in the past three years. We assume the bank's profitability and dividend payout profile to also remain broadly in line with the past three years. Depending on the bank's growth trajectory, it may need to raise new capital in 219. Our assigned Capital score of ba3 reflects our expectation that Yes Bank's TCE/RWA will remain within 9%-1%, given the strong credit growth. Strong profitability, supported by sound margins and the bank's focus on efficiency Yes Bank continues to generate strong earnings compared with that of its Indian banking peers, with pre-provision income as a percentage of average RWA of 3.3% and net income as a percentage of average RWA of 1.9% in fiscal 217. The strong earnings is a result of steady loan growth, coupled with strong fee income. In terms of the key earnings drivers, Yes Bank's net interest margin of 3.2% in fiscal 217 remained lower than the 3.6% average for the three other Indian private sector banks that we rate, owing to its higher cost of funding compared with the other private sector banks that we rate. Nevertheless, net interest income for the first half of fiscal 218 grew 34% compared with the year-earlier period. In addition, Yes Bank's share of non-interest income is much higher than that of other private sector banks that we rate. For H1 fiscal 218, the bank's non-interest income represented 39% of total income compared with the average of about 36% for the other private sector banks that we rate. In addition, non-interest income for H1 fiscal 218 increased 33% from a year earlier on the back of growth in income from foreign exchange, the debt capital markets and securities, as well as fees derived from corporate and retail banking. However, we expect some moderation in Yes Bank's profitability level owing to higher credit costs and our expectation of some moderation in income from foreign exchange, the debt capital markets and securities. Credit costs, as measured by loan-loss provisions/gross loans, increased marginally to 56 bps in fiscal 217 from 54 bps in fiscal 216 and 49 bps in fiscal 215. We have assigned a baa1 Profitability score to the bank to reflect the above factors January 218

5 Higher dependence on corporate deposits than that of its peers; although slightly mitigated by a growing retail deposit base Yes Bank finances its assets primarily through deposits, with customer and bank deposits accounting for 66% of its balance sheet and borrowings accounting for 18% as of the end of March 217. The bank's loan/deposit was 94% as of the end of September 217 compared with 86% a year earlier owing to robust loan growth. Yes Bank's deposit profile is weighted toward deposits from medium-sized and large corporates, institutions and government corporations, which in total accounted for 38% of total deposits as of the end of March 217. In addition, 36% of deposits are composed of low-cost CASA deposits. The remaining 25% of deposits comprise retail term deposits. While Yes Bank's current level of CASA deposits remains below the domestic peer average, the bank is building up its deposit base, as well as improving its branch network. The CASA ratio improved to 37.2% as of the end of September 217 from 3.3% a year ago. This compares with an average CASA ratio of 46.9% among the private sector banks that we rate. In addition to branch expansion, the bank leverages its corporate and institutional relationships to generate deposits by opening employee accounts. Yes Bank also reduced depositor concentration. The top 2 depositors represented about 11% of its total deposit base in March 217, compared with 17.6% in March 212. Yes Bank's funding profile was tested in July 213 following RBI policies to reduce short-term liquidity. Despite these pressures, the bank managed to sustain deposit growth through the period, indicating resilience to short (one to three months) periods of tighter liquidity. The bank's low reliance on large deposits and sound liquidity in the banking system also provide some mitigation. Moreover, the bank's ability to increase rates and continue growing deposits indicates that the long-term impact of tighter liquidity may be primarily felt through its cost of funding. Over the last few years the Bank has also been raising long-term foreign currency funds from multilateral institutions including Overseas Private Investment Corporation, International Financial Corporation (Aaa stable), DEG (the Development Bank of Germany, Proparco (the Development Bank of France). Our Funding Structure score of reflects the above considerations, as well as the relative positioning of the bank s funding profile compared with that of its Indian peers that we rate. Since January 215, the RBI requires all banks to adhere to the liquidity coverage ratio (LCR) rules, which seek to ensure that banks have enough high-quality liquid assets to withstand a 3-day liquidity stress scenario. The LCR is being introduced in a phased manner, starting with a minimum requirement of 6% from 1 January 215 and reaching a minimum of 1% on 1 January 219. For the quarter ended September 217, Yes Bank's LCR was 9.6%. Based on the LCR disclosure as of the quarter ended 3 September 217, Yes Bank's retail deposits and deposits from small business customers represented about 33% of its total deposit base. This compares with an average of 6% for the other private sector banks that we rate. We assign a Liquid Resources score of baa3 to reflect the bank's exposure to the Government of India (Baa2 stable) through the mandatory holdings of government securities. Rapidly expanding franchise, focusing on corporate banking Yes Bank is a new-generation private sector bank that received a banking license from the RBI and launched operations in May 24 as a wholesale bank, with mainly corporate loans and liabilities. The bank rapidly expanded its corporate loan book during the 28-9 global financial crisis and built a strong corporate banking unit. Since then, the bank continues to focus on developing its capacity to cross sell a wide range of corporate products while growing its retail, and small and medium-sized enterprise (SME) customer platforms. Over the last few years, Yes Bank has focused on building its branch network and its retail banking franchise. As of the end of September 217, the bank had 1,4 branches, which expanded from 43 as of the end of March 213 and 117 as of the end of March January 218

6 For the fiscal years , Yes Bank maintained a CAGR of around 28% in loans and 24% in deposits. The bank continued its growth momentum, with loans and deposits growing 35% and 23%, respectively, on an annual basis as of the end of September 217. Yes Bank's largest exposures are to large corporates, which accounted for 67% of its loan book as of the end of September 217, with the remaining 33% consisting of loans to retail, SMEs, micro SMEs and medium-sized corporates. Yes Bank expects the proportion of loans to retail, SMEs and micro SMEs to increase as it seeks to bring granularity in its exposure. We expect Yes Bank to record credit growth of 25%-3%, in-line with the trend in the recent years. Yes Bank's BCA is supported by India's Moderate Macro Profile Primarily a domestic bank, Yes Bank's Macro Profile is aligned with that of the sovereign at Moderate. India has a large and diverse economy, strong growth potential and improving global competitiveness. In addition, India's very large domestic market provides strong domestic demand-driven growth, fueled by rising incomes, which shelter the economy from the impact of external demand shocks. Credit conditions in India reflect high and entrenched leverage in some corporate sectors. While growth in corporate lending has slowed, corporate leverage remains high, despite asset sales and fresh equity infusions. However, household leverage is low, reflecting low-level banking penetration. The financial system experienced a deterioration in its asset quality in recent years. Nevertheless, we expect the stressed asset (NPLs + restructured loans) ratios to be close to their peak because most exposures to weak corporates have been recognized. As of the end of March 217, the problem loan ratios at more than half of the banks we rate were stable from a year earlier. A slowdown in net new NPL formation (adjusted for upgrades and recoveries) in the last fiscal year is another indication that asset quality will recover from the trough of the credit cycle. A cleanup of the banks' balance sheets is underway, with the latest efforts being the asset-quality review conducted by the RBI in December 215, and the promulgation of the Insolvency and Bankruptcy Code 216, which provides a clearer framework for NPL resolution. The amount of haircuts that banks agree to in upcoming NPL resolutions will be a driver for their financial profiles. The banks remain largely deposit-funded, with healthy contributions from current and savings deposits. That said, individual banks vary in their ability to gather retail deposits. Public sector banks (excluding the State Bank of India) are more dependent on wholesale deposits, while private sector banks tend to have stronger capabilities in retail marketing. Domestic liquidity is also supported by the Statutory Liquidity Requirement, which obliges banks to hold 19.5% of total term and demand deposits in the form of liquid government securities. Furthermore, all the banks that we rate are able to meet their current LCR requirements. The banks can meet their LCR requirements even though only a part of their holdings of government securities are included as high-quality liquid assets in LCR calculations. This testifies to the robustness of their liquidity profiles. The Indian banking system had total assets of INR122. trillion (around $1.9 trillion) as of the end of June 217, equivalent to 8% of the country's GDP. PSBs represent more than 7% of total banking system assets. The government has policies that require banks to direct a portion of new loans to targeted segments, which are known as priority sectors. All banks must comply with the priority-sector lending requirements. Nevertheless, we do not make any adjustments for industry structure, given the fact that many banks (especially the private sector banks) have performed well, despite the priority-sector lending requirements January 218

7 Support and structural considerations Affiliate support Yes Bank's ratings do not benefit from affiliate support. Government support considerations Our assessment of the moderate probability of support to Yes Bank in the event of financial distress takes into consideration Yes Bank's modest, but growing, market share and its relative importance to India's banking system. As of September 217, Yes Bank had a 1.9% and a 1.4% share of system loans and deposits, respectively. The support assumption results in one notch of uplift to the deposit rating of Baa3. Counterparty Risk (CR) Assessment CR Assessments are opinions of how counterparty obligations are likely to be treated if a bank fails and are distinct from debt and deposit ratings in that they (1) consider only the risk of default rather than both the likelihood of default and the expected financial loss suffered in the event of default, and (2) apply to counterparty obligations and contractual commitments rather than debt or deposit instruments. The CR Assessment is an opinion of the counterparty risk related to a bank's covered bonds, contractual performance obligations (servicing), derivatives (for example, swaps), letters of credit, guarantees and liquidity facilities. Yes Bank's CR Assessment is positioned at Baa3(cr)/Prime-3(cr) Yes Bank's CR Assessment, prior to government support, is positioned one notch above the Adjusted BCA of and, therefore, above senior unsecured and deposit ratings, reflecting our view that its probability of default is lower than that of senior unsecured debt and deposits. We believe senior obligations represented by the CR Assessment will be more likely preserved to limit contagion, minimize losses and avoid disruption of critical functions. Yes Bank's CR Assessment does not benefit from any further uplift from government support. Rating Methodology and scorecard factors About Moody's Bank Scorecard Our scorecard is designed to capture, express and explain in summary form our Rating Committee's judgment. When read in conjunction with our research, a fulsome presentation of our judgment is expressed. As a result, the output of our scorecard may materially differ from that suggested by raw data alone (though it has been calibrated to avoid the frequent need for strong divergence). The scorecard output and the individual scores are discussed in rating committees and may be adjusted up or down to reflect conditions specific to each rated entity January 218

8 Rating methodology and scorecard factors Exhibit 3 Yes Bank Limited Macro Factors Weighted Macro Profile Moderate Factor 1% Historic Macro Ratio Adjusted Score Credit Trend Assigned Score Key driver #1 Key driver #2 Solvency Asset Risk Problem Loans / Gross Loans 1.5% baa1 Quality of assets Capital TCE / RWA 1.8% ba2 ba3 Expected trend Profitability Net Income / Tangible Assets 1.5% baa1 baa1 Expected trend Combined Solvency Score Liquidity Funding Structure Market Funds / Tangible Banking Assets baa3 15.9% baa3 Deposit quality Liquid Resources Liquid Banking Assets / Tangible Banking Assets 25.8% baa3 baa3 Quality of liquid assets baa3 Combined Liquidity Score Financial Profile Business Diversification Opacity and Complexity Corporate Behavior Total Qualitative Adjustments Sovereign or Affiliate constraint: Scorecard Calculated BCA range Assigned BCA Affiliate Support notching Adjusted BCA Instrument class Counterparty Risk Assessment Deposits Senior unsecured bank debt Loss Given Failure notching 1 Baa2 baa3-ba2 Additional Preliminary Rating Notching Assessment baa3 (cr) Government Support notching Local Currency Rating 1 1 Baa3 (cr) Baa3 -- Foreign Currency Rating -Baa3 (P)Baa3 Source: Moody's Financial Metrics 8 16 January 218

9 Ratings Exhibit 4 Category YES BANK LIMITED Outlook Bank Deposits Baseline Credit Assessment Adjusted Baseline Credit Assessment Counterparty Risk Assessment Issuer Rating Moody's Rating Stable Baa3/P-3 Baa3(cr)/P-3(cr) Baa3 YES BANK, IFSC BANKING UNIT BRANCH Outlook Senior Unsecured MTN Stable (P)Baa3 Source: Moody's Investors Service 9 16 January 218

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11 Analyst Contacts 11 CLIENT SERVICES Alka Anbarasu VP-Senior Analyst Gene Fang Associate Managing Director January 218 Srikanth Vadlamani VP-Sr Credit Officer Americas Asia Pacific Japan EMEA