Sluggish growth in advances is worrying with deposits, seen growing at a faster rate, and this is likely to impact the balance sheet of the bank, CSB Bank MD & CEO C V R Rajendran said.
Deposits are flowing in a big way as an immediate impact of the Covid-19 pandemic and new loan proposals are not seeing much growth. Every new deposit coming today will create additional loss for the banking industry due to the negative carry, he said.
“Demand has come down for most of the retail advances. Business loans are also not growing. Only growth is in existing business shifting from other banks. On the other side, NRIs coming back are putting money in the banks because of no other options,” he added.
Rajendran pointed out that the real impact of the pandemic on the asset quality of the bank would only be known when the moratorium period was over.
“Micro-loan segment recovery is good and increasing. NBFCs are also servicing the loans in places where the lockdown is lifted, and business is back. Trading is also recovering, but the worry comes from the SME segment. The manufacturing sector has issues and we have also given Covid loans. Sales and collection are a big issue in the manufacturing sector,” he said.
On the issue of growth in advances, he said the bank was focusing on gold loan, two-wheeler and used-car loans.
“Gold loan is one sector, which is showing growth but there is good competition. Two-wheeler loans are seen growing with people preferring own vehicles to public transport. We are also looking at used car loans,” he added.
Gold loans accounted for 31 % of the bank’s total advances portfolio of Rs 12,240 crore as at the end of FY20.
Kerala-based CSB Bank, formerly known as Catholic Syrian Bank, was listed in 2020 and the bank reported a net profit of Rs 12.72 crores for FY20, thereby breaking a streak of continuous losses. CSB had reported a net loss of `197.42 crores in FY19.
Due to the re-measurement of DTA and reversal of MAT credit, there is a one-time impact on P&L amounting to Rs 87 crore. But for this, the net profit would have been Rs 100 crore for FY20.The intended benefit of this measure will accrue to the bank in the following quarters by way of lower tax rates, he said, adding that to strengthen its balance sheet, the bank was also holding excess provisions .
On the expansion the bank, he said the bank had plans to open 100 branches in the current financial year and could go for more with real estate prices seen lower.
“We are also looking at the inorganic growth possibility with our parent company announcing that it could bid for PSU banks if allowed. We are also evaluating the private sector banks and, if there are good opportunities and Fairfax, will invest,” he added.