Karnataka Bank has announced its second quarter FY10 results. Its Q2 consolidated net profit went down to Rs 16.3 crore from Rs 73.6 crore. P Jayarama Bhat, Managing Director of the bank says that pressure form low credit off-take and low credit deposit (CD) ratio on the net interest income are the resons for the weak performance of the bank this quarter. He further says that there will be re-pricing of deposits in the second half and almost 25% of term deposits are going to be re-priced.

Here is a verbatim transcript of an exclusive interview with P Jayarama Bhat on CNBC-TV18. Also watch the accompanying video.

Q: If you could just quickly walk us through what really led to this sort of weak performance this quarter around. Was there any pressure coming in from the low credit deposit?

A: There was a pressure on our net interest income because of the low credit offtake and low CD ratio, which we are correcting in the coming half year. We are aiming at a CD ratio of 65% by March 2010, which will definitely increase this net interest income. Added to that, there will be re-pricing of deposits in the second half and almost 25% of our termed deposits are going to be re-priced. This will give us a cushion as far as the payments of deposits are concerned and clearly a downside of about 175% in cost of deposit. So this will definitely increase the net profit and its pressure on the net interest income will come down.

Q: If you could also walk us through in little more details in terms of what the deposits and the advances stood at this quarter and what is your current account and savings account (CASA) deposit now?

A: We are having a turnover of Rs 34,000 crore and deposit of Rs 21,582 crore as against that advances is Rs 12,487 crore and CASA is 22.52%, which has increased from March 2009, it has increased from 19.36% to 25.52%. In fact, we are increasing the fixed deposit (FD) portion, which will definitely give me a leverage as far as cost of deposit is concerned.