Thrissur-headquartered CSB Bank’s net interest margin (NIM) will moderate to 4.5-5% in FY25 from 5.04% in the quarter ended March 2024, managing director and CEO Pralay Mondal told FE.

NIM, a key indicator of lenders’ profitability, will moderate as the share of lower yielding small and medium enterprises (SME) and wholesale loans will grow in the overall loan mix, while gold loan will moderate.

CSB Bank’s overall advances stood at Rs 24,572 crore as on Q4FY24 end, up 18% year-on-year (y-o-y). Of the total, gold loans accounted for 48%, corporate loans formed 24%, retail loans accounted for 17%, and SME loans formed 11%. The lender will continue growing loans at the similar pace of 18% in FY25, Mondal said.

Deposits, which stood at Rs 29,719 crore as on March-end, will grow at a higher pace of 21% during FY25 as the lender wants to maintain its credit-deposit ratio around 83%-85% in FY25. The lender will open 60-75 branches in the current fiscal for deposit mobilisation in several states, including Maharashtra, Uttar Pradesh, Gujarat, Rajasthan, Punjab, Tamil Nadu, Karnataka and Delhi.

CSB Bank saw its profit after tax for the March quarter decline by 3% y-o-y to Rs 151 crore in Q4. This was on account of nearly Rs 20-crore provisions made for an account with Rs 70 crore outstanding that slipped during the quarter, Mondal said, adding that higher interest cost also hurt the bank’s net profit.

The lender is expecting to recover the account in H1FY25, and accordingly expects its gross and net non-performing asset ratio (GNPA, NNPA) to moderate by nearly 20 basis points (bps) from 1.47% and 0.51%, respectively, in January-March.

IT spends

CSB Bank is spending nearly 7-8% of its overall operating expenses in building IT services and the figure will only rise in the next three-four years, Mondal said. His comments come at a time when the Reserve Bank of India (RBI) has imposed severe business restriction on Kotak Mahindra Bank due to persistent non-compliance with regulatory norms on IT infrastructure.

“Our maximum investment is happening in tech currently. Most of the IT system will be new-age, best in class, and almost nothing will be there which was present four years back in the bank. In that sense we are building a new bank by rebooting tech ology completely,” he said.

“My fundamental principle is deliver what you promise consistently, 24X7 anywhere in the world and do the basic things right. A cherry on top is fine, but good quality and profitable customers may look for the cherry but they want cake to be proper,” he added.

The bank in 2022 hired veteran banker Sharad Saxena to propel its IT infrastructure, Mondal said, adding that large banks today stand in a dynamic position with rise in customer expectation, business growth, UPI transactions and cybersecurity threats.