‘For the first time ever it has come below 1 per cent, at 0.97 per cent.’
Photograph: Shailesh Andrade/Reuters
Canara Bank will not sacrifice margins for growth and it will be conscious about the cost, be it for lending or raising funds, K Satyanarayana Raju, managing director and chief executive officer of the public sector lender, told Manojit Saha/Business Standard in a video interview.
With liquidity becoming tight, will you be able to maintain a net interest margin between 2.9-3 per cent, as projected?
In the last quarter, we said we would like to maintain NIM (net interest margin) between 2.9-3 per cent.
In the December quarter, we have the NIM at 3.03 per cent. Among major reasons, one is we have a liquidity coverage ratio of 135 per cent.
We want to use it effectively. We also have an excess SLR (statutory liquidity ratio) of 6 per cent.
This excess SLR we are keeping with the RBI (Reserve Bank of India) and raising low cost borrowing.
Another thing is, from SIDBI and Nabard we are getting refinance whenever there is a possibility.
Because our priority sector lending is at 56 per cent. We are claiming the refinance at 5.5 per cent.
NPA recoveries, recoveries from written off accounts have helped us to reduce the credit cost which for the first time ever came below 1 per cent, at 0.97 per cent.
All these factors helped to maintain margin at 3 per cent.
I continue to make the commitment that NIM will be between 2.9-3 per cent in the coming quarter. Our endeavor is to see we are closer to 3 per cent.
Current and savings account (CASA) deposit growth was around 5 per cent. Do you see it improving?
Our CASA growth is comparatively less. We have given 8.5 per cent growth in deposits so that we can achieve a 75 per cent credit deposit ratio, as against projected 10.5 per cent advance growth.
Because advances are growing at 11.69 per cent, deposits are growing at 8.55 per cent but CASA is not growing at the level at which overall deposits are growing.
So from January 1 we started a special campaign on core deposits, which includes retail term deposits as well as CASA.
We are sure that we will maintain 8-8.5 per cent growth both in Casa and retail term deposits.
The increase in risk weights have impacted Canara Bank s capital adequacy ratio by 52 bps. Do you have any plans to raise capital in Q4?
For the last three quarters we are growing over 12 per cent in credit and we were able to maintain CAR above 16 per cent by plough back of our internal accruals, from the net profit only.
Even then our board has also approved raising Rs 3,500 crore of AT1 bonds and Rs 4,000 crore Tier II bonds in the current financial year.
Since we are very particular about the rate of interest and cost involved, we are waiting for a better opportunity.
In the first week of December we came to the market to raise Rs 1,000 crore via AT1 bonds, keeping in mind that the expected rate might be 8.4 per cent for our appetite.
We got bidding in excess of Rs 1,000 crore so we accepted the entire Rs 1,443 crore.
Up to 8.4 per cent whatever bids have come, we accepted. So we have the permission for the remaining Rs 6,100 crore.
Whenever we feel market conditions are favourable we will raise. We will come to the market by March, or in the first quarter.
Have you increased the interest rates to NBFCs following the increase in risk weights?
Yes, in fact we are the first bank in India to communicate to NBFCs who were affected due to increase in risk weights [about interest rate increase].
About 95-98 per cent of the NBFCs shared that burden following mutual negotiations.
One or two cases where they felt it was not feasible for them, we let them go and asked them to make the entire prepayment.
That is the reason our NBFC exposure has come down from Rs 143 crore to Rs 135 crore.
We are cost conscious. We don t want only to focus on the top line at the cost of the bottom line.
What was the extent of rate increase for the NBFCs (non-banking financial corporation)?
It varies from AAA rated to A rated to BBB rated. It has ranged from 15 bps to 50 bps.
Domestic loan growth was healthy at 12.5 per cent. Do you expect loan growth to improve further in the current financial year?
Our guidance is 10.5 per cent, we are already growing at 12.5 per cent. Cost of funds is so high that is the raw material for lending. So we do not want to grow beyond 12 per cent.
Can you give us some updates on the listing of subsidiaries?
Our board has already approved Canara Robeco Mutual Fund for listing. The other one Canara HSBC Life Insurance is in the process of getting approval from the board.
In a month or two, the board is expected to clear the proposal. These two are likely to list in FY25.
Feature Presentation: Aslam Hunani/Rediff.com