We'd like to be seen as a full service new-age private bank: CSB Bank chief

In a Q&A, C V R Rajendran, MD & CEO, CSB Bank Ltd, dwells on how the lender turned around in FY20, after several years of losses

After reporting continued losses, Fairfax-backed CSB Bank (formerly Catholic Syrian Bank) finally turned around by reporting Rs 134 crore as against a loss before tax of Rs 300 crore in 2018-2019. Despite having taken a one-time hit of Rs 87 crore on its P&L account for switching over to lower tax rates, the lender posted net profit of Rs 13 crore in FY20 from a loss of Rs 197 crore the preceding year. The bank had, in fact. been reporting losses right from 2014-15 till 2018-19, with a meagre profit of Rs 1.55 crore in 2016-17.

C V R Rajendran, Managing Director & CEO, CSB Bank Ltd, tells T E Narasimhan that 2019-20 has been a landmark year in the history of the lender, as it got listed and returned to profitability. Edited Excerpts:

What are the key factors that helped the bank turn around?

Capital infusion of Rs 1,208 crore by Fairfax gave us the impetus for the kind of growth that we have been aiming for (the bank is now well capitalised for the next two years). The IPO has improved public perception following the successful listing of shares. Improvement in CD ratio duly focussing on gold loans with higher yield, raising deposits at lower costs, and the clean-up on the NPA front in 2018-19 with an accelerated provisioning policy helped too.

Changes in staff pattern added to the impetus. During the past three years all incremental recruitments were on CTC basis with the average salary below Rs 5 lakh per annum as against the IBA's eaverage of about Rs 9 lakh. Reduction in retirement age from 60 to 58 for IBA officers also resulted in reduced staff cost and provisions. Reduction in slippages and improved recoveries were also critical.

How challenging was it given the Covid-19 situation?

Even in normal times, the first quarter is a period of lull for business growth in banks. Despite this, Our deposit portfolio has grown significantly. Gold loans, Loans to Agri & MFI, MSME and two-wheeler financing are also on the upward trajectory.

Some of the expected recoveries were impacted in the last fortnight of 2019-20. Functioning of branches was not generally affected as digital banking was being promoted. BCP for key functions was ensured.

How confident are you about maintaining the momentum? What challenges do you foresee?

The gold loan portfolio share improved from 26 per cent in 2018-19 to 31 per cent in 2019-20 at a growth rate of 28 per cent. We plan to keep up the momentum and increase the share to 35 per cent in 2020-21. Considering the demand in the retail segment even during this Covid period, we will be able to grow our retail portfolio, especially two-wheeler loans, Agri & MFI, MSME.

On the deposit front too, we are confident of maintaining momentum. In 2020-21, we have recorded a decent growth of more than Rs 500 crore so far. Also we have a track record of more than 90 per cent renewals. Regarding growth in the SME/Corporate sector, we will be cautious considering the present economic condition and will scale up once clear signals of revival are seen.

What will be the key focus of the bank going forward?

We are targeting a growth of Rs 2,000 crore in retail. Gold loans will continue to be the core business driver. Our aim is to increase the portfolio share from 31 per cent to over 35 per cent in 20-21.

In other retail segments, we will be mainly focussing on personal loans and educational loans where we plan to have a 5 per cent portfolio share in 2020-21

We have plans to increase and build a strong agri loan and micro loan book with high quality of the portfolio and enhanced profitability. The Agri and MFI vertical is stabilised now with a closing book of Rs 160 crore as on March 31, 2020. Agri & MFI vertical propose to build Agri Loan disbursement of Rs 400 Crore and Micro Loan disbursement of Rs 600 crore in 2020-21.

Our focus is more on the Micro segments and MSMEs in the manufacturing and services sector with Small to medium sized stores, traders, small manufacturing units etc. The recently launched MSME vertical has started penetrating the targeted segments.

How are the NPAs and how do you plan to bringing it down further?

In 2019-20, stellar improvement is seen in our asset quality. The GNPA and NNPA levels are at 3.54% (Rs 409 crore) and 1.91 per cent (Rs 217 crore) respectively. During this lockdown period also we have attempted to pursue collections to the extent possible and our efforts have yielded results. In 2020-21 we are targeting a recovery of Rs 225 crore and expecting lower slippages.