State-run Canara Bank has seen a notable turnaround in its low-cost deposit base, with savings deposits growing 8 percent on-year and retail deposits rising by Rs 75,000 crore in the last one year, K Satyanarayana Raju, the Managing Director and CEO of the lender has said.
In an interview with Moneycontrol, Raju said the bank’s renewed focus on customer service and innovative products has helped strengthen its current and savings account (CASA) franchise, a segment that had been a weakness for the lender.
The CEO added that the credit growth momentum will remain strong in H2FY26, supported by robust demand in MSME and vehicle loan segments. While margins remain under pressure following Reserve Bank’s (RBI) June rate cut, Raju expects profitability to improve gradually from March quarter.
This is Raju’s last quarter at the helm of Canara Bank as his tenure ends in December 2025.
Edited excerpts:
Your tenure ends in December. Since you joined, the bank’s NPAs have halved, and gross advances have risen by over Rs 3.5 lakh crore. How do you see your journey?
It has been a very satisfactory journey. Whatever we aimed to do to grow aggressively without compromising on compliance or quality we have achieved that.
The main challenge was CASA. It has been a persistent weakness for the bank, but we didn’t ignore it. We took it up as a challenge and to some extent succeeded. Today, everyone in the bank from top to bottom is focused on CASA. We launched new products, services, and platforms to strengthen our CASA base.
In the last one year, our savings bank (SB) deposits alone grew by Rs 20,000 crore, and retail deposits increased by Rs 52,000 crore. So, from retail customers, both savings and term deposits together grew by Rs 75,000 crore showing our success in reconnecting with customers.
CASA deposits have grown sharply this quarter, especially the current account part. What drove this growth?
We do have some institutional accounts where balances fluctuate. Compared with June, you may see a sharp increase, but if you look from March, the figure is slightly lower. These institutional deposits depend on the clients’ surplus funds, so the balances fluctuate.
However, if you remove these institutional deposits, there is consistent growth. Our SB deposits are growing at around 7.7 percent, roughly 8 percent, which is very good and sustainable in the current environment. Month on month, we are meeting our targets.
After the GST cut on September 22, demand reportedly surged. Can we expect a stronger Q3?
Traditionally, credit growth is higher in the second half of the year, Q3 and Q4. Since we ended Q2 with good momentum, we expect similar growth in the coming quarters.
Vehicle loans have seen an immediate jump. As consumption rises, MSME lending also increases. When demand and production rise, MSMEs need more working capital. We grew 12.5 percent in MSME in September and expect to end the year around 15 percent.
So yes, MSME and vehicle loans will likely be the key growth drivers in Q3.
On margins, your guidance was 2.75–2.8 percent, but actuals are 2.52 percent. Will you revise the guidance?
We don’t usually revise guidance mid-year. Our target remains 2.75 percent. The repo rate cut of 50 bps in early June impacted margins as 46 percent of our portfolio is repo-linked, while term deposits remain at fixed rates. This pressure will continue until Q4 as high-cost deposits mature.
However, in absolute terms, net interest income increased by Rs 132 crore between June and September, indicating that margins have likely bottomed out. We expect improvement from Q4 onwards provided there’s no further rate cut.
Any major NCLT recoveries expected in Q3?
Recoveries are ongoing. There’s no specific large account identified for Q3, but our recoveries consistently exceed slippages. Last month alone, we recovered over Rs 600 crore.
Any plans to transfer accounts to NARCL?
Some accounts are being discussed at the consortium level. We will participate wherever we have exposure. The minimum threshold is Rs 500 crore from the banking system, and the number of such accounts is gradually declining.
RBI recently allowed banks to finance M&A deals. How do you view this opportunity?
Canara Bank is already a major player in corporate lending. We see M&A financing as a good business opportunity that offers better returns than short-term loans. Earlier, we couldn’t participate due to regulatory constraints, but now we’re preparing to capitalize on such opportunities.
What about ECL (Expected Credit Loss) norms? Have you assessed the provisioning impact?
Yes, we have. The additional provision requirement is much smaller than what we estimated one or two years ago. We’ve been building buffers for the past year by proactively providing for accounts showing early stress. Even this quarter, we created Rs 400 crore in provisions. With six more quarters to go, we’ll continue building buffers, so the ECL transition should have minimal impact.
There’s ongoing talk about PSB consolidation. Have you received any communication from the government?
No, there’s been no official or informal communication. We only hear about it from the media perhaps you have better information than we do.
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