RBI's liquidity move boosts rate cut expectations: Canara Bank MD & CEO

I personally feel that steps may start addressing concern only from April onwards. In two months, the banking industry, most of them, will be aggressive on the top line, K Satyanarayana Raju said

The Reserve Bank of India’s steps to address liquidity conditions support the expectation of a rate cut, said K Satyanarayana Raju, managing director and chief executive officer, Canara Bank, in a telephonic interview with Abhijit Lele. Edited excerpts: 

What are the implications of the RBI’s move on the system and your bank?

 

The deposit rates may come down slowly.  They are injecting Rs 60,000 crore in three tranches.  We expect that some softness may happen. But, if it happens before March or not, again, is a question. The reason is most of the banks may focus on top line growth. If they (banks) go for it, then they will engage in competitive pricing. So, the interest war, whether it will end before March 31 or not, is something we have to wait and see.

 

Given the RBI’s steps to address liquidity issues, are you expecting the rate cut in the upcoming policy review?

 

Naturally, because last quarter itself they (RBI) mentioned a neutral policy stance. And yesterday's guidance to the market is also supporting our expectations. But, ultimately we have to wait and see.

 

You expressed concern about the bulk deposit rates reaching 8 per cent. Are RBI’s actions addressing this? How much excess statutory liquidity ratio (SLR) does the bank hold over regulatory requirements to raise resources from RBI?

 

The steps may start addressing concern only from April.

 

Our bank has 8 per cent excess SLR securities over regulatory norms. We are using them often for taking the funds from the RBI window at a cheaper rate. In absolute terms, the excess SLR pool of bonds amounts to Rs 60,000-70,000 crore.

 

Now, coming to the business side, how is the bank doing on the gold loan front – agriculture and retail segments?

 

The portfolio grew by 23-24 per cent in FY24. But this year, we expect that we may grow at 15 per cent on both sides. Both retail as well as agriculture gold loan portfolios are growing. The base is changing in agricultural gold loan. The entire metropolitan area is shifting to retail now. There is a growth in the rural and semi-urban agricultural gold loan. The outstanding gold loan book is about Rs 1.7 trillion.

 

Turning to asset quality, the bank seems to be giving thrust on one-time settlement (OTS) to clean up the portfolio. What is the recovery target, including OTS, in the fourth quarter?

 

The bank has a total cash recovery of around Rs 3,100 crore in the December quarter. We expect the same level of recoveries in this quarter as well. 

The bank is making use of legal forums like Debt Recovery Tribunal (DRT) and National Company Law Tribunal (NCLT).  Basically, these are the tools used to make them (borrowers) come to the table for negotiation.

  Otherwise, if you depend only on the process, your sacrifice will be more. Our recoveries will come more through OTS.

 

You spoke about focus on champion sectors for growing loan books. What exactly is that?

 

Under the Enhanced Access & Service Excellence (EASE) programme, each public sector bank has to identify some sectors as champion sectors where it will grow more. 

We may create some special windows for fast disbursements. So, the bank has identified the following as champion sectors -- infrastructure and green energy and data centres.