Capital Small Finance Bank will maintain the CASA at 37 percent in the coming quarters, said Sarvjit Singh Samra, managing director and chief executive officer, in an exclusive interview with Moneycontrol.
According to an investor presentation of the bank, the CASA percent of the total deposits stood at 37.1 percent in the July-September quarter, as against 39.5 percent in April-June quarter, and 37.8 percent in the same period last year.
The total deposits of the bank increased to Rs 7,780 crore in Q2FY25 from Rs 7,778 crore in Q1FY25, and Rs 7,000 in Q2FY24.
Samra also said that the bank will remain cautious on the microfinance lending even though the exposure to the sector is not direct and less than 1 percent of the total loan book.
Excerpts from the inuterview:
Why your CASA percent of total deposits have fallen sequentially?
As far as CASA is concerned, there may be some decline, but it's almost constant. In the second quarter, we always find some dip in CASA from the Q1 numbers. It is a historical trend, which is depicting in the current period also. We need a retail franchise with a branched model. There is enough relievers available that will continue to contribute to CASA, but CASA is an industry trend and we will be working along with the market.
We are very confident that we will be able to deliver better than the market even if there is a decline in the industry as a whole. The decline will be much lower than the decline of the other players.
The arbitrage between the savings bank interest and the term deposit interest is quite high, which is the one major factor, which is moving the CASA money to the term deposit money. The second movement is happening from the CASA money to other investment avenues. I will see that movement is possibly more from the term deposit. CASA money is typically moving to term deposits.
The Reserve Bank of India has changed its stance and with that we anticipate rate cuts and in that scenario, the arbitrage will get reduced. Accordingly, we will get benefit on the CASA.
Do you have target ratio for term deposit and CASA?
Our wish list is always to have a CASA above 37 percent, but we will be market-driven. We do not want to maintain below this level.
Your cost of deposits have increased over the quarters marginally. Is it safe to say it has peaked?
Our cost of deposit was 5.8 percent in Q1, which is presently 5.9 percent, a change of just 10 bps primarily because of the change in the composition of the deposit.
The expenses come only because of the change in the CASA composition from 38 percent to 37 percent. Interest rate environment, which we are anticipating will continue from a neutral to downward trend, just then I anticipate a few quarters of stable deposit at cost at this point and then start looking downward.
What are your guidance on NIMs after it remained stable in the last two quarters?
It will be stable or higher. Last year, penal charges were part of the interest and now it is part of the non-fund, which accounts for mathematically 0.12 percent for us.
Going forward, net interest margins will stay at this level or may remain upwards. A slight improvement in the NIMs is expected, as we move forward for the current year. For the half of the current financial year, we expect NIMs to remain at 4.4 percent.
How much is your MFI book of the total loan book?
We don't lend to the MFIs. We lend to NBFC-MFIs and their exposure is 1 percent of the total loan book. In absolute terms, it is around Rs 57 crore to Rs 58 crore.
Due to stress in the MFI segment, we have slowed down. Our total exposure to the sector is now just Rs 57 crore, which was Rs 73.84 crore in the previous quarter.
What is the progress happening on conversion to a universal bank licence?
We want to tick all the boxes, and now there is only one box standing which is net NPA. Our net NPA needs to be below 1 percent for the universal banking licence. To bring down the net NPA, we have done some additional provisions this quarter.
We are still mindful of the same thing. We are carrying on a similar timeline. That is June to September next year. We want to bring the net NPA down to the below 1 percent level, to keep our target intact.
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