Current & savings accounts can grow without interest hikes: Canara Bank CEO

Bengaluru: Sitting pretty with an average cost of funds at 5.38%, Canara Bank plans to sustain its pursuit of current account savings account (CASA) growth without any raising of interest rate, as persuaded by the Reserve Bank of India.  K Satyanarayana Raju, managing director and chief executive officer of Canara Bank is convinced that its services and not interest rates will draw this class of depositors. He argued these depositors are not interest rate sensitive.

“I feel 90% of the people will not keep the money in CASA for returns. They expect service that makes them happy. If you focus on that, naturally growth will be there,” Raju said in an interview with DH.  He pointed to his bank’s performance in growing CASA to support his argument, clearly more focussed on keeping the cost of funds down.

With a capital adequacy ratio of 16.2%, the bank is in no hurry to mobilise funds. “At this moment, we would like to focus on our internal accruals because those are more than sufficient to meet our growth. In any emergencies, the board has given us permission to raise Rs 7,500 crore but in the  AT1(additional tier-1) (Rs 3,500 crores) and tier-2 bonds (Rs 4,000 crores). If the market pricing is conducive to us, then we may raise this from the market,” Raju informed. 

In fact, he is very pleased with the bank’s recent outing to the bond market. “We received an overwhelming response. We came to the market for Rs 5,000 crores but the subscription has come for Rs 50,000 crores and we got very very competitive pricing,” he said.

After reporting a 42.8% surge in its net profit at Rs 3,606 crore for the second quarter of the financial year 2023-24, the bank is now looking at sustaining this growth in the next two quarters as well. “Initially we have given the guidance at 10.5% conservatively for credit growth in the current financial year but we are hopefully reaching 12-13% growth. In fact, it is already at 12.11%. For deposit growth also, we had given a guidance of 8.5% but we are already at 8.66%,” he underscored. 

The Bengaluru-based public sector bank, with 62% of its branches in the semi-urban and rural parts of India is gung-ho about its deep presence in these markets. The bank’s RAM (retail, agriculture and MSME) credit grew by 13.63% to reach Rs. 5,16,949 crore, representing 56% of total advances. Specific segments such as education and vehicle loans saw increases of 14.68% and 9.29%, respectively. However, it was advances in agriculture that saw the most significant surge, with an impressive growth rate of 20.54%.

However, it is also streamlining its operations, consolidating its spread of branches. “This year we are closing down 400 branches and opening up 275 branches,” Raju said, adding that the idea is to merge within 200-300 metres of each other unless they are able to justify their presence with their volume of business. 

On the bank’s corporate accounts, he noted, “The corporate growth is not in line with the RAM growth, which is a cautious call taken by the bank,” Raju reasoned, adding that there is no lack of proposals but the bank is currently in the process of fine-tuning existing portfolios worth Rs 60,000- 70,000 crores, to make them profitable before growing it any further. “We are reducing investments in places where we are bleeding and deploying it in some other place where we get a better price.”

As for its global business, the bank currently operates three overseas branches. It also recently opened a branch in GIFT city, full-fledged operations of which will commence in November, taking this count to four branches, Raju informed. “Together these are contributing around Rs 1.34 lakh crore of the bank’s overall business of Rs 2156 lakh crore,” Raju added.

FILE PHOTO - A rickshaw puller passes the Canara Bank branch in the old quarters of Delhi India September 6 2017. REUTERS/Adnan Abidi/File Photo