An improvement in the current account and savings account (CASA) share in total deposits is likely to be a challenge for the bank this fiscal, said Canara Bank’s CEO and MD K. Satyanarayana Raju in an interview with Moneycontrol.
He attributed this to the lower interest on these deposits during the Reserve Bank of India’s (RBI) rate cutting cycle, making customers reluctant to keep funds beyond a certain limit in these accounts.
“I don't think the people will keep surplus money beyond their requirement, but they will convert it to short-term deposits. That's why growing beyond that percentage may not be practically possible at this juncture,” Raju said.
CASA share
In the January-March quarter, Canara Bank reported a 31.17 percent CASA share in its total deposits, which was almost 2 percent less than the guidance provided by the bank at the start of the last fiscal year.
In absolute terms, the CASA deposits of the bank grew 5.77 percent on-year in Q4FY25 to Rs 4.15 lakh crore, from Rs 3.92 lakh crore in the year-ago period. Within its CASA deposits, savings deposits have a higher share of Rs 3.37 lakh crore, while the current account deposits stand at Rs 77,841 crore, according to the bank’s investor presentation.
Raju said that to maintain the CASA share at the current rate, the total deposits have to grow by 10 percent, and if the bank wants to increase the CASA share, then deposits would have to grow by 15-16 percent, which is not practically possible at this juncture.
For the financial year 2025-26, Canara Bank had given a guidance of 32 percent share for CASA (Domestic CASA to Domestic Deposit). Raju said the bank may see some reduction or the same level of CASA share of total domestic deposits by the end of this fiscal year.
The problems over CASA deposits are expected to persist because of the rate cutting cycle started by the RBI, which leads to adjustment of deposit rate on the lower side, making it challenging for the banks to attract more deposits.
Corporate loan yields
Further, Raju said that the yield on corporate loans is likely to ease by 10-15 basis points (bps) in the coming months due to the RBI rate cut.
He added that the adjustment in the corporate yields takes time because most loans are linked to the Marginal Cost of Funds based Lending Rate (MCLR), which gets adjusted with deposit rates.
MCLR calculations are done based on the bank’s interest rate on deposit and repo rate. Based on the MCLR, the bank fixes interest rates for different types of customers as per their risk profile.
Usually, banks revise MCLR on a monthly basis based on the repo rate adjustment and other rates related to borrowing.
In financial year 2024-25, the average yield on corporate loans was 8.21 percent, which Raju expects to come down to 8.06-8.11 percent in the coming quarters.
On May 9, Canara Bank reduced MCLR rates by 10 bps across tenures, with effect from May 12.
There is a growing consensus among market participants that the RBI will cut more rates in the coming policies, in order to support growth amid a tariff war, with cooling inflation providing an elbow room for lower rates.
On April 9, the central bank reduced the key repo rate by 25 bps, the second such cut in a row, on a benign inflation outlook and moderate growth. It also shifted its stance from ‘neutral’ to ‘accommodative’.
Loan growth
Raju also said during the interview that the bank will focus on industries in steel, cement, data centres, real estate, residential and commercial, and green energy in corporate loans.
With the focus on these industries, the bank aims to grow the corporate loan book by over 10 percent in 2025-26.
In the January-March quarter, corporate and other advances increased by 9.83 percent to Rs 4.63 lakh crore, from Rs 4.22 lakh crore in the year-ago period. It stood at Rs 4.57 lakh crore a quarter ago.
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