Despite lower yields dissuading certain large and mid-sized private sector lenders from expanding their large ticket corporate loan portfolio, Canara Bank, a prominent public sector bank, has taken a different approach. Over the last four months, they have approved corporate loans amounting to Rs 60,000 crore and have already disbursed approximately Rs 20,000-25,000 crore for such loans, as revealed by the bank's MD & CEO, K Satyanarayana Raju, in an interview with Mukesh Athavale of ICCBizNews.
Which sectors are experiencing notable credit growth?
We are witnessing significant growth in the retail, agriculture, and micro, small, and medium enterprises (MSMEs) segment, as well as in vehicle loans, housing loans, and personal loans for the salaried class. In the MSME sector, we have introduced 15 area-based products that have gained considerable traction. Although the sowing season has not yet begun in the first quarter, we observed substantial progress in food processing, agriculture infrastructure, and to some extent, self-help groups in the agriculture sector. As for corporates, there is ongoing growth in infrastructure, green energy, and data center development, for which we have provided some sanctions.
How do you perceive the issue of mispricing risk in large ticket corporate loans?
According to some banks, there seems to be a mispricing of risk in large ticket corporate loans. In my opinion, when aiming for a growth rate of 20-25%, it might be necessary to compromise on pricing. However, if we choose to grow our corporate loan portfolio at a rate similar to our RAM loan growth, which is around 13%, we can be more selective in picking suitable ticket sizes. I believe that making quick decisions can significantly boost our appeal to corporates.
What is the expected volume of corporate deals in the pipeline for this fiscal year?
Over the last four months, we have already sanctioned corporate loans amounting to more than Rs 60,000 crore. The approximate disbursement during this period stands at Rs 20,000-25,000 crore. Our board regularly reviews corporate proposals every fortnight, and each time we witness approvals of not less than Rs 10,000 crore.
What are your strategies for increasing the CASA ratio from its current level of 33% as of June-end?
Out of the total CASA balance of Rs 3.60 trillion, Rs 40,000 crore comes from the current accounts, while the remaining Rs 3.20 trillion is from savings bank accounts. To enhance our CASA ratio, we have implemented various initiatives and products targeted at our savings bank customers. We have categorized our target customers into two groups - those who prefer branch interactions and those who do not.
The first product caters to the younger generation and salaried class who prefer non-branch interactions. It's called the premium payroll package and has gained significant traction among employees aged between 25 and 35 years. Currently, Canara Bank's existing salaried customer base is approximately 700,000, and within the initial 3.5 months of its launch, we have already onboarded 310,000 customers.
The second initiative involves facilitating online account opening through video KYC, while the third one is the introduction of tap-banking. Additionally, we are in the process of setting up smart branch counters, acting as account opening kiosks and cash recycling points, further enhancing our offerings to customers.
What is the projected NIM trajectory for FY24?
Managing interest expenses remains a challenge for all banks, Canara Bank included. However, we haven't encountered any issues with raising deposits, as the current rates are competitive. Over the past four months, we have successfully achieved net incremental growth in retail term deposits of around Rs 8,000 crore. Therefore, I don't anticipate the need to increase the interest rates on retail term deposits beyond the existing ones. Currently, we offer interest rates ranging between 7.25% to 7.75% on average for senior citizens and other customers through 3-4 schemes, and these rates are expected to continue in Q2FY24 due to the prevailing liquidity conditions in the system.
Additionally, we have launched a recurring deposit (RD) campaign with a target of Rs 1,000 crore in the next two months, building upon our existing base of around Rs 3,800 crore.
Given these factors, it is likely that our interest expenses will remain at their current level, and we expect to manage a NIM of around 3% in FY24.
Are you currently operational with the UPI Lite feature on the digital side?
Yes, we have completed all preparations for UPI Lite. However, we are awaiting the approval from NPCI (National Payments Corporation of India). Once we receive the go-ahead, we will be fully operational.
Your bank was one of the pioneers in linking UPI with RuPay credit cards. How has the response been so far?
Since its implementation, we have observed that approximately 10% of our active credit card holders, which total 258,000, have chosen to utilize this feature.
Have you enabled interoperability of CBDC payments with UPI QR code?
Indeed, we are the first bank to introduce interoperability for CBDC payments. In terms of onboarding both merchants and users, we rank among the top banks, having onboarded over 7,000 merchants with a target of reaching 8,000. Our customer base is also reaching almost 200,000. In terms of value, the adoption is yet to pick up fully. We have taken initiatives to promote CBDC payments and have provided stickers to all 7,000 merchants indicating their acceptance of CBDC payments. However, the real traction will occur once all banks enable interoperability for CBDC payments.
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