Canara Bank looks to grow business to Rs 30 trillion in five years

After crossing business growth of Rs 20 trillion in December, public sector lender Canara Bank is looking to grow its business – deposits plus advances – to Rs 30 trillion in about five years.

As of March 2020, that is before amalgamation – Canara Bank business was over Rs 10 trillion and on April 01, 2020 – Syndicate Bank having business of Rs five trillion was merged with Canara Bank. So both put together, the business was Rs 15.6 trillion, which in about two years and nine months has touched Rs 20 trillion. That is about Rs 4.4 trillion of business added.

L V Prabhakar, its outgoing managing director and chief executive, Canara Bank said that all systems and processes were in place and various verticals have been formed including gold loan plazas and mid corporates unit. With this, the growth momentum will continue forward. His term ends today.

"The normal industry growth is 13-14 per cent. There is a challenge of a bigger base as the balance sheet expands. It should take at least five years to reach Rs 30 trillion level", Prabhakar told Business Standard.

After announcing results for the quarter-ended September 2022 (Q2FY23), the Bengaluru-based lender guided 8.5 per cent YoY growth in deposit and 8.0 per cent growth in advances for FY23. Its deposits grew by 9.82 per cent YoY basis to Rs 11.33 trillion and advances by 20 per cent (YoY) to Rs 8.24 trillion by end of September 2022.

Prabhakar said the bank has grown in RAM segment – retail, agriculture and MSME -- at 16.4 per cent, which is 55 percent of the portfolio. Corporate credit has 45 per cent share in loan books and has grown by 22-23 per cent. The growth in more broad-based which is coming from housing, gold loans agriculture, MSME and corporate.

Dwelling on strategy for raising resources (deposits), he said the bank has set up a centralised processing hub where accounts – current and savings (CASA) – are opened with great speed without any KYC deficiencies. Plus, it has  started a 666 days’ term deposit scheme with 7.0 per cent interest per annum.

The lender is also raising the money through certificates of deposits (CDs) and bulk deposits only when they are available at competitive rates. “There is no necessity that we have to raise them (CD and Bulk). The liquidity coverage ratio is already comfortable at 120 per cent”, he asserted.

Asked about the challenge of reaching 38 per cent share of CASA in total deposits, he said in September the share was 34 per cent. Though it is not easy to reach the target (38 per cent), the bank expects to comfortably reach that level by March 2023. Apart from money coming in individual accounts, substantial amounts from various government schemes to accounts of beneficiaries will flow in the fourth quarter, he said.

On the competition in the term deposits market, he said the liquidity in the market was about Rs 7-8 trillion about five-six months ago. Subsequently, the Reserve Bank of India sucked out liquidity and now surplus is about Rs 0ne-two trillion. Inflation was high at that time and plus there were geo-political issues, so RBI withdrew liquidity and increased the interest rate.

"Now, inflation has come down to 5.88 per cent which is within the guidance of RBI. So further liquidity tightening may not happen. The economic conditions in the country are good and the macro conditions at the global level will also improve in the backdrop of the lessening of geo-political tensions.

The funds will also flow from outside to India so the liquidity position will be sufficient. When the liquidity condition improves naturally the rate of interest on the deposits will be smoothened. The rates are expected to soften by the end of quarter or the early next quarter, a beginning of the new financial year, he added.