MC Exclusive| CSB Bank does not expect Prem Watsa's Fairfax Group to sell further stake in bank, says CEO Pralay Mondal

Pralay Mondal

Prem Watsa's Fairfax Group is not likely to sell further stake in CSB Bank, managing director and chief executive officer of the bank Pralay Mondal told Moneycotrol in an exclusive interview.

"We do not expect the company will sell their stake, even this one they didn't want to do but because of the regulatory thing they have to sell this. They had to do it because the regulator had told when they had given the approval at the beginning in 2018-19," Mondal said.

Earlier this year, Prem Watsa's Fairfax Group sold a 9.72 percent stake in CSB Bank through block deals, raising about Rs 595 crore.

As per the bank's investor presentation, FIHM held a 40 percent stake in the bank as on September 30. FIHM held a 49.72 percent stake in the bank as of March 31, 2024, which fell to 40 percent post the stake sale.

Mondal also said the bank does not see any major impact on its gold loan portfolio after reviewing the policy and entire portfolio.

The review was done after the Reserve Bank of India last month urged banks and non-banking financial companies (NBFCs) offering gold loans to thoroughly review their policies, processes, and practices to identify any gaps.

The central bank also told them to closely monitor their gold loan portfolios amid significant growth observed in this segment vis-à-vis some lenders. The RBI has also instructed these lenders to ensure adequate controls over outsourced activities and third-party service providers. Edited excerpts:

Why have your net interest margins (NIMs) compressed in this quarter?

The cost of funds is not coming down for anybody and overall, the cost of deposits is elevated at this point of time in the system, hence this is happening.

Most banks on a quarter-on-quarter basis have gone through a little bit of a challenge on NIMs, primarily because of a few things such as elevated deposit costs, which are not being able to pass on to the market because the market is competitive, and penal interest norms by RBI where accumulation is no longer allowed, as per regulation.

Going forward, NIMs will remain at a similar level or will marginally start picking up from Q4 onwards.

Have you assessed your gold loan portfolio after the RBI circular?

We had a large gold loan portfolio, we had intercepted a lot of these things which has now come out as a circular by the RBI. We have been working on it for the last 12-15 months and we have put a lot of measures in place by which we may not have any major surprises or shock in our portfolio. We had implemented a lot of these things proactively.

For us, we hope that the impact will be very limited if at all there will be. After reviewing with the entire internal team, we are not seeing any major impact on this portfolio. There may be one or two small issues here and there, which are more process oriented issues, which will not affect revenue items.

We are not seeing a major impact on our revenue items, but maybe we have to put a little more rigour in terms of audit, documentation, and end-use documentation. I don't see a major change between what we are doing and what we will do now. Our portfolio will keep on growing from here on.

From where have the slippages come from in this quarter ?

The larger part has happened in retail and in microfinance loans, agri-MFI.

You have written off some accounts, which are these?

We usually write off credit card debt in 180 days and a large part of current write-offs have also come from the credit card side.

Why has your treasury profit increased sharply?

Falling yields have benefitted us and our treasury head has taken prudent calls during that period, which helped us to book such an amount of treasury profit.

After the start of the rate cut cycle, we will take appropriate calls to try to make profits from that opportunity.

Do you think that Prem Watsa’s Fairfax will further sell their stake in your company?

Going ahead, we do not expect the company will sell their stake, even this one they didn't want to do but because of the regulatory thing they have to sell this. They had to do it because the regulator had told when they had given the approval at the beginning in 2018-19.

Any bancassurance partners you are planning to add?

We are very happy with the current four partners and we don't need at this point of time.