Festive demand, GST cut to lift Indian Bank’s Q3 loan growth; CASA revival remains a challenge, says CEO Binod Kumar

Indian bank

Indian Bank expects loan growth to accelerate in the third quarter of the current financial year, supported by festive-season demand, lower interest rates and the full impact of the government’s recent GST rate cut, managing director and chief executive officer Binod Kumar told Moneycontrol in an interview.

After a strong Q2, Kumar said the lender sees further momentum in Q3, driven by retail and MSME segments. “Historically, Q4 is the best quarter, but this time Q3 should also be strong. The GST rate cut came into effect only on September 22, so the full effect will play out now,” he said.

The bank expects robust traction in vehicle loans, consumer durables and MSME credit, with demand boosted by festive spending. Kumar said housing loans will remain a key growth driver given the attractive pricing environment.

Indian Bank’s home loan portfolio has grown about 13 percent so far this fiscal, and Kumar expects it to expand around 15 percent in H2, aided by both festive demand and competitive pricing.

CASA ratio dips but efforts on to stabilise

While credit growth remains steady, the bank faces challenges on the deposit side. The current account–savings account (CASA) ratio has fallen from 40 percent to 38 percent, although deposits have risen in absolute terms.

To strengthen its CASA base, the bank has launched six new products and opened 1.77 lakh new accounts in the last quarter. It is also aggressively targeting salary accounts, where the average balance has improved from Rs 25,000 in Q1 to Rs 44,000 in Q2.

Indian Bank is additionally using digital solutions and collection tie-ups with state governments and educational institutions to increase deposit inflows.

“We won’t compete on rates, but will offer add-ons like insurance and better debit and credit card features,” Kumar said, adding that the rollout of a CRM system will provide a 360-degree view of customers and aid retention.

Open to M&A financing

Kumar said the bank is open to financing mergers and acquisitions (M&A) after the Reserve Bank of India’s (RBI) policy change, though final guidelines are awaited.

“We are open to doing it. Banks will have a clear pricing advantage over private credit players, and unlike them, we won’t take equity exposure,” he said.

ECL impact expected to be limited

On the Expected Credit Loss (ECL) framework, Kumar said the bank is assessing the impact but does not expect a material hit.

“Even if the final guidelines remain unchanged, the impact will not be much. We may not even require the full five-year transition period,” he said.