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India's Yes Bank reported a smaller-than-expected increase in quarterly net profit on Saturday as it set aside more money for ageing bad loans and security receipts, denting the impact of higher net interest income.

The private lender's standalone net profit rose 10.3% for the April-June quarter from the same period last year to 3.43 billion rupees ($5.25 million), missing analysts' average forecast of 3.80 billion rupees, according to Refinitiv data.

Yes Bank's provisions and contingencies, net of recoveries made against loan accounts written off as bad, more than doubled to 3.60 billion rupees from 1.75 billion rupees a year earlier.

The bank had outstanding security receipts worth 72.24 billion rupees, for which it has set aside 45.73 billion rupees.

The gross non-performing asset (NPA) ratio decreased to 2% at the end of June from 2.20% at the end of March, while its net NPA ratio rose slightly to 1% from 0.80%.

The bank expects bad loan recoveries and upgrades of more than 50 billion rupees for the financial year that began in April, managing director and chief executive Prashant Kumar told reporters at a conference call.

The Mumbai-based bank's net interest income, the difference between the interest earned on loans and paid to depositors, rose 8.1% to 20 billion rupees.

The net interest margin, a key indicator of a bank's profitability, rose to 2.5% from 2.40% a year earlier. Margins will be under pressure this quarter as deposits get priced, Kumar said on Saturday.

Yes Bank's advances grew 10% on year, led by retail loans, while deposits rose 13.5%.

It targets credit growth between 15% and 20% and deposit growth of 20% this financial year, Kumar said.

The bank also wants its corporate loan book, which shrank during the quarter, to expand in the coming quarters, with appropriate risk pricing, he said.

($1 = 81.9800 Indian rupees)