'Afterwards, some improvement is expected.'
Following Canara Bank's earnings in the fourth quarter of 2024-25 (Q4FY25), K Satyanarayana Raju, MD & CEO of the bank, in an interview with Anupreksha Jain/Business Standard in Mumbai talks about the bank's performance during the period and outlined the strategic approach being adopted across various segments in the current financial year (FY26).
How do you see your margin trajectory evolving going forward, especially considering the dip observed in Q4?
Earlier, penal interest was counted under interest income, but due to changes in accounting systems, now it is part of other income, thereby reducing the net interest income (NII).
Secondly, the cost of deposits peaked till March, but there was no scope for increasing the rate of interest on the advance side, denting the income.
Thirdly, the regulator started reducing rates, hence there was added pressure on net interest margin (NIM).
Rate cut benefit has already been transmitted to external benchmark lending rate (EBLR) linked portfolios, but it will be difficult to reduce the rate of interest on deposits as the competition to mobilise deposits is still there.
NIMs will remain under pressure for the first two quarters. Afterwards, some improvement is expected.
You have maintained your credit growth target. What is your outlook on the corporate segment in FY26?
Corporate credit growth was around 10 per cent in FY25 and this year also we will maintain the same run rate as it is crucial to expand the top line.
In April and May, we already sanctioned around Rs 28,000 crore.
Another Rs 25,000 crore to Rs 26,000 crore is in the pipeline for disbursement.
Overall, more than Rs 50,000 crore is in the pipeline.
As far as the recovery target is concerned, we aim that our recoveries should be more than slippages.
Additionally, in Q4, we transferred three accounts as per consortium decisions.
How will the revised liquidity coverage ratio (LCR) norms help the bank?
We are already at a comfortable level of LCR around 139-140 per cent. Going forward, we will be matching the run off factor of 2.5 per cent on mobile-based deposits.
Further, we are looking for some benefit from reducing the lower run off rate on non-fund based entities such as trusts as we got a significant amount of deposits from non-government organisations.
What are your views on the drop in loans to the agriculture and MSME segments in Q4?
We have stopped giving gold loans for agriculture in certain areas, including some metropolitan cities in line with corrective steps taken by the regulator.
Now, we are giving gold loans purely for consumption which has boosted our retail loan portfolio.
That's why the retail growth is around 43 per cent. So it is just shifting from agriculture to retail.
For MSME also, the regulator has come with a new guidance to regulate MSMEs, and that they must have Udyam portal registration number for existing customers.
In non-performing asset (NPA) accounts, generally you don't get the support from the customer, therefore, we have to reclassify them into non-MSME accounts, showing muted growth.
RBI has expanded colending arrangements to all regulated entities. How do you see this playing out?
In colending, we never compromise our underwriting standards to facilitate arrangements or bring them down to the level of NBFCs.
We continue to engage in colending partnerships as long as they align with our existing credit underwriting norms.
However, there is a general expectation that we dilute our standards to meet NBFC requirements, which we are not willing to do.
As for the non-priority sector, we will explore opportunities selectively, though we may not be active in the personal loans segment.
Feature Presentation: Aslam Hunani/Rediff.com
© 2025