CSB Bank expects wholesale banking and its Business Lending Group (BLG) portfolio to drive loan growth, with the mix within the wholesale book gradually shifting towards large corporates and commercial banking. Managing Director and CEO Pralay Mondal, in an interview with Kshipra Petkar, says the bank remains on track to grow loans 30-50% faster than the banking system despite lower June-quarter disbursements. Excerpts:
Loan disbursements declined sharply in the June quarter. What led to the slowdown?
The decline is largely technical rather than demand-driven. The fall has come from retail and gold loans. We stopped our repledger business after the RBI circular, so that business has almost gone away. In gold loans, customers can now renew their loans instead of closing and taking fresh ones, which has reduced reported disbursements. Softer gold prices have also meant fewer top-up loans. Importantly, none of this has affected our portfolio growth.
Will this trend continue over the coming quarters?
This should now be treated as the new base. We are not losing business. If disbursements had really weakened, the loan book would have shrunk, but our advances have still grown 24% year-on-year. We continue to maintain our guidance of growing 30-50% faster than the banking system across both loans and deposits, and we believe that is achievable.
Which businesses will drive growth going forward?
Wholesale banking will continue to be a key growth driver. BLG (Business Lending Group) book should improve as the operating environment stabilises. Gold loans will continue to grow, though the pace will depend on gold prices. On the retail side, we want to build our liability franchise first. Our technology transformation is complete, so we are now launching products to acquire CASA customers, and unsecured retail lending will expand on the back of that franchise.
How do you see the wholesale loan mix evolving over the next few years?
Our wholesale book has three segments—large corporates, commercial banking (mid-market) and financial markets. Going forward, commercial banking and large corporates will grow faster than the financial markets book. The share of financial markets in the wholesale portfolio will gradually come down. We expect financial markets to account for around 30% of the wholesale book by the end of FY27, and decline further to around 25% by the end of FY28.
Slippages and credit costs increased during the quarter. Should investors be concerned?
No. Most of the increase came from gold loans and a few SME accounts. Gold loan slippages happen when prices fall and loan-to-value ratios are breached, but customers generally regularise those accounts by bringing in additional collateral or making repayments. These do not normally translate into losses. We also expect some of the BLG accounts that slipped this quarter to be upgraded over the next quarter or two.
How do you see margins and asset quality evolving?
We believe margins should only improve from here because our business has a seasonal pattern. Credit costs should also moderate. Our broad guidance remains unchanged—we expect gross NPA to stay below 2%, net NPA below 1% and credit cost below 50 basis points.
Any capital raising or branch expansion plans?
We do not see any need to raise capital over the next two years, and we plan to continue opening around 40-50 branches every year as part of our pan-India expansion.
There are reports that Fairfax’s proposed acquisition of IDBI Bank could eventually lead to a merger with CSB Bank. Has there been any discussion on this?
There have been absolutely no discussions—either within the bank or with Fairfax. Even at our board meeting on Wednesday, where Fairfax nominees were present, the issue never came up. Unless something concrete happens, we will be informed. So far, nothing has been communicated to us.
