The current account savings account (CASA) ratio of South Indian Bank will likely return to its peak level of 34% in the next 12 months, according to managing director and chief executive officer P R Seshadri.
“We are trying to open more accounts, engage more with businesses. Our savings account balances continue to grow on a average basis. We are trying to build these balances,” he said.
The CASA ratio fell to 31.8% as on December 31, 2023, from 33.8% a year ago. “CASA ratios have been tight for banks in general. This is because pricing on term deposits has increased and people have become more diligent in moving funds to time deposits from current and savings accounts,” he said.
Separately, the bank’s net interest margin fell to 3.19% in the December quarter from 3.52% a year ago. The compression came in line with trends in the banking industry. “To increase net interest margin, we need to change our product mix, which is a part of our strategy. We need to start originating more granular assets. We need to get our MSME portfolio to start growing,” he said.
Currently, the corporate segment comprises 38% of the overall loan portfolio of the bank. Around 94% of the corporate book comprises low-margin loans to large entities with a rating of ‘A+’ Seshadri refrained from providing any guidance, and acknowledged that the bank will continue to see a compression in margins as deposits are re-priced upwards.
This compression in margins is likely to sustain for many quarters as the competition for deposits intensifies and banking system liquidity remains tight. “Our NIMs are bit more protected that peers because our assets are of shorter duration.
Due to this, we get the opportunity to re-price if the market moves,” he said, adding that the bank will be able to manage any further compression in margins due to the structure of its balance sheet.