Canara Bank: Mobilising Deposits
As the banking sector struggles to keep deposits’ pace in line with credit growth, state-owned lender Canara Bank remains confident about mobilising deposits and improving its NIM
State-owned lender Canara Bank reported a 11 per cent year-over-year (YoY) growth in Q1FY25 net profit, which stood at Rs 3,905 crore. Even as banks struggle to mobilise deposits, the lender’s total domestic deposits rose 11.47 per cent to Rs 12.31 lakh crore. Gross non-performing assets (NPAs) stood at 4.14 per cent in the quarter under review compared to 5.15 per cent in Q1FY24. Net NPAs also declined to 1.24 per cent compared to 1.57 per cent in the year ago period. The bank reduced its credit to NBFCs by 18.5 per cent on a yearly basis in the quarter gone by. Canara Bank CEO & MD K. Satyanarayana Raju explains the lender’s performance in Q1FY25 and its efforts to mobilise deposits and impact of Reserve Bank of India’s latest draft guidelines on LCR norms.
On business performance
For six consecutive quarters, we have maintained consistency in out financial ratios and growth metrics. We have aimed for a steady growth rate of around 10 per cent in our balance sheet size. While other banks struggled with deposit growth, we proactively addressed the issue early by introducing new products and initiatives to attract depositors.
On deposit growth
Our deposit mobilisation efforts have been successful, leading to over 11 per cent growth in both deposits and advances. Our credit growth has been slower recently due to our strategy of shedding low-yielding advances to improve our Net Interest Margin (NIM). Despite this, we have maintained a 10 per cent credit growth rate and have shed significant amounts of corporate loans worth Rs 22,500 crore to enhance margins.
On RBI’s draft LCR norms
Canara Bank has been proactive in managing liquidity and has a strong liquidity position, with a Liquidity Coverage Ratio of around 140 per cent, compared to the regulator's 100 per cent requirement. We believe that our current liquidity position will comfortably support the projected credit growth, despite new stringent guidelines. Our existing LCR and the existing deposits are more than enough. Our credit-deposit ratio is around of 73-74 per cent. That is an ideal position to run the bank for longer and we are in complete sync with the regulator.
On improving credit assessment for MSME
Canara Bank has been ahead of the curve in developing separate risk ratings for MSME, which has contributed to a reduction in MSME NPAs (non-performing assets) from 14 per cent to 8.42 per cent. This has been through the introduction of area-specific products and enhanced digital underwriting standards.
On strategic adjustments in sector exposure
The recent declines in credit exposure to sectors like petroleum and NBFCs are part of strategic adjustments rather than signs of weakness. The decline in petroleum loans is attributed to the repayment of short-term loans provided during the Russia-Ukraine conflict. In the NBFC sector, the reduction in exposure is a result of shedding low-yielding advances, which has allowed the bank to focus on higher-rated NBFCs.
