Given the uncertainty around the India-US trade deal, CSB Bank will be cautious in lending to small and medium enterprises, Pralay Mondal MD and CEO said in the post earnings interaction. On Wednesday, the bank reported a net profit of `160 crore, up 16% on year in the July-September period.
“We are a little cautious on SME at this point of time till we have clarity on the bilateral deal. So, especially in certain segments like textiles, it will depend on how the environment is picking up and taking shape in the next 1-2 months,” he said.
For the current financial year, the bank aims for a loan growth of 25-30% and a deposit growth of 20-25%. As on September 30, the bank reported a year-on-year growth of 29% in advances and 25% in deposits. During the quarter, the disbursements were up 50% on year to `13,001 crore. However, disbursements slowed down in retail and wholesale segments.
“The loan against security (gold) was earlier placed under retail. However, after the RBI’s revised guidelines, we have started winding it down and we want to bring it down to as low as possible by April,” he said. He added that the bank has been cautious on the credit card segment, and the unsecured book. He expects to see growth in the wholesale book in coming quarters.
The bank aims to focus on its agriculture book and grow it in the second half of the financial year. “A lot of our agriculture business happens to gold owners. So, from a PSL (priority sector lending) compliance perspective, we are net sellers in the market. So, that’s why we don’t have to do agriculture to do a PSL. So, we are building that capacity. Right now, it (agriculture book) is around 3% or more than that.”
The net interest income was up 16% on year to `424 crore and the other income too inched up by 75% on year to `349.20 crore. The net interest margin of the bank inched up to 3.81% from 3.54% a quarter ago.
The asset quality improved with the gross non-performing asset ratio at 1.81% as on September 30 as against 1.84% a quarter ago and the net NPA ratio at 0.52% against 0.66% a quarter ago. The bank aims for a credit cost of around 50 basis points for the next 2-3 years. Currently, the credit cost of the bank has been stable for the past 2 quarters at 53 basis points.
“So, I think somewhere around 40-50 basis points we should be in our credit cost. If we are lucky, if some recovery happens, we may fall down further also. But it will not go up from here.”
On Fairfax India Holdings Corporation bringing down its stake further in the bank, Mondal said that as per the policy, it will have to bring it down.
“While they did not want to do so, and we wrote to RBI, but the regulator did not agree because it was part of the terms of approval. The RBI has set a glide path there and is open to conversation. For now, we know that over the five years, the stake will have to come down. Of course, FairFax is speaking to RBI as well, but I am not privy to the discussion.”