MC Interview: Canara Bank is focused on CASA growth, says MD Raju

Canara Bank MD seeking CASA boost

In a period marked by strong business performance, deposit growth has been Canara Bank’s Achilles heel, as it has been for other public sector banks. The bank reported a modest 6.6 percent growth in its deposits and its low-cost current and savings account deposits were flat year-on-year.

The priority is to boost its CASA growth to help it manage its cost of funds and Canara Bank is lining up targeted products to do so, said Managing Director and Chief Executive Officer, K Satyanarayana Raju, in an exclusive interaction with Moneycontrol. Raju added that CASA growth from companies is unlikely, and the banking industry would need to rely on retail growth this year.

On the asset side, the bank is being cautious in lending unsecured personal loans and monitoring small business loans more closely to avoid future delinquencies and losses, he said. Notwithstanding the caution, the bank is targeting a loan growth of 10 percent and above for the current year and may raise capital from the bond market in the second half, towards growth capital.

Edited excerpts:

You have said that you are aiming to boost retail CASA growth. Could you elaborate on your measures?

Our new products that we launched in April have seen good traction. Before the product launch, we had 11 lakh salaried class depositors. Since the launch, we have opened three lakh more salary accounts. More than 5,000 organisations have given their consent to divert their salary accounts to us and the deposits through these new accounts is Rs 1,300 crore. During the rest of the year, we will be introducing (CASA) products specifically for women and also products for pensioners.

What is the trend on wholesale CASA? Do companies still keep large balances with you?

Wholesale CASA is not a driver of deposit growth anymore. You cannot expect any growth and it is very limited. Banks have to depend on retail CASA. Earlier, public sector companies had large balances with us but now it is not so.  After the introduction of CAN/SNA (central nodal agency; single nodal agency) by the government, public sector funds do not just lie with the banks. So, banks cannot expect a big jump here.

On loan growth, how much of it do you expect from corporates?

Last year, we had surplus cash which we deployed in short-term corporate loans. Some of these loans have come up for repricing. There is definitely fresh demand in the market. We are selecting who to lend to, based on pricing. When you have ample opportunity, you can choose who to lend to. We are choosing only selective proposals. The demand is more broad-based, but the majority of the capex is coming from the government sector. We are also getting good private sector demand in the renewable space. Infrastructure is leading, followed by data center creation. Others are the ethanol and biogas segments which are also showing good traction. The government’s PLI scheme is helping private investment demand.

Have you encountered mispricing in corporate loans?

There is competition. We are not keen on competing with other banks for topline growth. We compete with our own historic performance. We are particular about consistency on all ratios. Our decisions would be purely based on that. We would not lend at throwaway prices. Where we believe the pricing is not favourable, we will move out. We can easily achieve our credit growth target.

For you, MSME loan growth is lower than other categories. Are you being extra cautious here and why?

There is still stress among MSMEs. From our point of view, we have had double digit NPAs earlier. One thing we have done is that for below Rs 25 lakh loan disbursement, there is end-to-end digitisation. Here, lending cannot be arbitrary. For above Rs 2 crore, we are focused on the cash flows of the firm. In instances where we see ring fencing of receivables, we are more liberal. We are focused more on area-based schemes, we are targeting clusters. We also want to go for co-lending arrangements.

How has the ECLGS cohort performed?

Our outstanding disbursement under ECLG scheme was Rs 19,600 cr. Out of this, repayments have happened and Rs 13,500 crore remains. Only Rs 800 crore have slipped into NPA. So, the segment is not at all in pain.

Many banks are looking at branch network expansion. Considering your CASA plans, do you plan to expand yours?

We are carrying out branch rationalisation post-merger and also expansion simultaneously. It depends on the geography we are present in. Some areas may have more branches than required. This year we will rationalise around 400 branches but will also open 200 branches in various places. So, our network may shrink but we are actually optimising.

Your capital adequacy ratios are healthy. Since you are targeting 10.5 percent loan growth, would you need capital for the same?

We will need capital for growth and to maintain our capital adequacy ratios. Our board has approved raising Rs 7,500 crore via Tier-1 and Tier-2 bonds, out of which Rs 3,500 crore would be AT-1 bonds. We would look at how the market is reacting and what pricing we get. There is no emergency for us to go right now and raise funds. But we may go for funds once the market is favourable.