Canara Bank CEO & MD, K. Satyanarayana Raju speaks to BW Businessworld's Arjun Yadav on RBI's draft rules for lending and heightened monitoring of under-construction infrastructure projects, the focus on increasing deposit growth and the progress on monetisation of some of its subsidiaries. Edited Excerpts:
How would you describe the financial year gone by for the banking industry?
I must accept that the last financial year was probably one of the toughest financial years for the bankers because of the steep increase in the cost of deposits. The rising volatility in the market, coupled with no change in the repo rate, added to the woes. The entire burden on deposits was forced to be absorbed by the banks. Initially, we were worried, but we restructured our plans on every front, be it deposit growth, credit or raising funds. We focused on CASA and retail term deposits and brought new initiatives to boost them. We also found new avenues to raise the liabilities. On the asset side, we shifted our focus towards the RAM sector, where our yield improved significantly. So, in effect, through such efforts, our plan came out successfully, which helped us record 37-38% growth in net profit and our NIM as well at 3.05 per cent at a time when almost all other banks lost their NIM.
How much of the concern persists around the CASA, the deposit growth and going forward any guidance to bring it in sync with the total deposits?
In the last quarter of the previous fiscal, our CASA improved by 63 basis points. CASA will continue to be our thrust area, and within CASA, it is the individual savings accounts we are targeting. In the first month of the current quarter, we accumulated Rs 5,300 crore in individual savings bank accounts compared to Rs 16,000 crore in the last full fiscal year. We have given guidance on 10% deposit growth and endeavour to grow on both sides - CASA and retail term deposits. In the last fiscal, we could raise about Rs 40,000 crore from retail term deposits. While retail term deposits are a little costly, they are sustainable as one does not get any steep fluctuations, and the LCR is not affected.
You have taken a call that you want to grow faster in the RAM sector than the corporate sector. Can you explain the dynamics behind these loan growth aspects?
Last year, our retail loan growth stood at 11.68 per cent. This year, we expect our retail growth to be 13-14 per cent because we are seeing tremendous traction. In the first month of this fiscal, we have seen an accumulation worth Rs 3,000 crore in retail advances. Also, we are a pioneer in the gold loan portfolio and will continue to grow healthily. As far as corporate is concerned, we want to grow in double digits, maybe 10-11 per cent, but if we get the opportunity without compromising the pricing, we will surely go for it. However, we don't want to grow too fast in the corporate sector just for the sake of the top-line.
How is Canara Bank looking to navigate the developments around RBI's draft norms proposing tighter rules for lending and heightened monitoring for under construction infrastructure projects?
For the last two years, I believe that the regulator has been preparing the industry to move towards the IND AS and expected credit loss provisioning. When we have to move towards IND AS, everyone knows that the provisioning norms will be stricter in the coming days; it is not a new concept nor a surprise. I see the regulator preparing the industry mentally, step by step. It is the right time because every bank is doing very well. Banks have ample scope in their margins to absorb any such little shocks or pressure on their margins.
Talk us through the razor sharp focus on asset quality, your gross and net NPAs both have come down compared to last fiscal.
We had given the guidance of bringing down our gross NPA to 4.5 per cent, but we achieved 4.23 per cent. This year we are confident we will bring it to 3 per cent. Similarly, on the net NPA side, we may touch 1.27 or go below 1 per cent by the end of this fiscal year. We have put forth a two-pronged approach to achieve this. First, when assets reflect in SMA 0, SMA 1 and SMA 2, we try to address it by meeting the parties, having proper follow-ups, and addressing any resolutions if necessary. This has helped in bringing down our SMA stress.
On the other hand, because of the IBC and the NCLT proceedings, there has been a drastic reduction in slippages in the corporate sector. We have also centralised our SARFAESI proceedings. It used to be done in all 9000 branches, but now it is centralised at 177 regional offices. These offices have legal officers with expertise and background in recovery. So, all these measures have resulted in this close tightness, which we are confident will also continue this fiscal year.
Can you please also brief us on the progress of monetisation of your subsidiaries, what can we expect in FY25?
The two identified subsidiaries are Canara HSBC Life Insurance and Canara Robeco Mutual Fund Company. In both of them, we are the lead promoter, having a stake of more than 51 per cent. For Canara Robeco, we have the necessary approvals and may get listed in the last quarter of FY25. Canara HSBC, in the next two months, the proposals will be put forward to the board, and I am expecting its listing in the first quarter of the next fiscal.
What would be your message to retail investors given the turnaround the public sector banks have witnessed in the last 10 years?
The government has transparently transformed public sector banks, especially in selecting the top management. It has brought a sea change in the working of these banks along with the regulator's constant monitoring. I strongly recommend retail investors that they can rely on this sector without any fear; just be patient, and if one is a long-term or mid-term investor, then it is heaven for you to invest.
