NII growth was a bit soft this time, and came in at just 5% on a year-on-year basis. Was there any impact of the penal charges in this quarter and in terms of the cost of funds? Is most of the repricing behind us already and will it stabilise now?
Satyanarayana Raju: In the first quarter, we have withdrawn some of the sanctions that we have given to the good rated companies at a very low rate of interest, that is Rs 30,000-35,000 crore. We have withdrawn that. It has helped us in managing our NIMs and the margins. The yield on advances, we increased it from 8.66 to 8.77. The 11 basis point we could increase in the September quarter.
We withdrew the low yielding advances and it was redeployed in the high yielding advances and though there is a burden on the cost of deposit, we were able to manage that at the same level because we have looked at the alternative resources like infrastructure bonds and we have a window excess SLR of 8% which we have pledged with the RBI and availing the overnight borrowings at 6-6.5%.
We are looking at alternative resources instead of only depending on the deposits which are costing us heavily. But it does not mean that we are not growing at the deposits. Deposits are also growing at par with the credit. In the last 20 months, we have launched almost 10 new products in the CASA. These products are giving a good CASA and absolute numbers year-on-year. We have grown Rs 18,000 crore in the savings bank account in just the last one year.
From last quarter to this quarter, we have grown Rs 8,000 crore in absolute numbers in the savings bank individual CASA. That is why by doing all these things, we are managing that cost at the same level, but we are trying to improve our yield on advances but we already improved much better. We feel that the further scope is limited because any time we expect some rate cut, if the rate cut comes, our EBLR-linked advances, we have a 41% of total exposures under EBLR link, there we may have to lose some income.
What is the outlook when it comes to CASA because as a percentage, it is still below your desired range? What is the strategy in place?
Satyanarayana Raju: We are the lowest among the peer banks in the CASA, but the strategy what we adopted is not the only mere offering a half percent or 1% more interest rate, now the people are looking at what are the add value we are getting it when they are opening an account with us. That added value we could recognise because we have an in-house R&D department. We are floating different products based on the different sections of the society. We have created a Canara Aspire for students which are aged between 17 to 28. It was launched in the current month. Already, we onboarded more than one lakh students on that. Last April, we launched one more product – Canara Angel – targeting women customers. Last year, we launched premium payroll packages, selected for non-salaried classes and retirees. We have launched one more product. In all these products together, we got almost Rs 16,000 crore new CASA in new enrolments. We are in the right direction. Altogether in 10 products, we have onboarded 17 lakh new customers and that is a source for us for even not only the CASA, savings bank balances, for cross-selling of our retail products it is helping. Our branch contribution in our retail growth is increasing. Now, almost 85% of our business growth is garnered by brick and mortar.
In terms of asset quality, your NPAs in the MSME segment are high. The market is already seeing stress in unsecured books and MFIs. Do you have any exposure to these segments?
Satyanarayana Raju: First, let me speak about that MFI. In Canara Bank, there is a policy restriction for lending to the MFIs, a board level restriction we brought it and the bank cannot lend to any single MFI beyond Rs 40 crore. So, our restriction was there in the MFI because we have predicted in the last one, one-and-a-half year, two years back itself, there will be a stress in this, that is why this inbuilt restrictions we brought it.
With that, last year, our outstanding for MFI was around Rs 650 crore, which after one year has come down to Rs 380 crore, almost 50% lower. So, our total exposure to MFIs is only Rs 350- 380 crore, which is well within our control.
The second one is personal loans. Our total personal loans under the retail segment is Rs 18,000 crore. Out of that, Rs 12,000 crore are from the salaried class or the pensioners who draw their salaries and the pensions through our bank. We do not sanction or disperse any personal loan to the non-customers or even the customers without the salary or without the pension.
The non-salaried class or non-pensioners would not get any clean loan in our bank. So that way, that is our repayment, cash flows are secured, and we do not see any stress in there. The remaining Rs 6,000 crore is unsecured educational loans. It is well within our appetite. We do not see any abnormality on that. Finally, if you look at our retail NPA, it is only 1.06%. And for other personal loans, the percentage of NPA is only 0.50.
Could you clarify why you have decided to slow down on the gold loans in the agri sector?
Satyanarayana Raju: We have already reached a certain stage and our portfolio became Rs 1,65,000 crore. In the last three years, we have grown almost at a 30% growth rate. So, it is the time we felt that to safeguard the portfolio, to build that portfolio organically and healthily, we thought that we have to take certain decisions at that level in line with the regulator’s expectations. We stopped lending for gold loans at interest subvention, that we stopped last year itself in October onwards.
This year, we stopped lending for the agriculture purpose in the metropolitan cities. These two have brought it down to the growth rate of gold loans from 30% to 17-18%. But still, we believe that 17-18% is a good growth in the gold loan, that is the way we can control that portfolio. Otherwise, since we have the biggest gold loan portfolio, we should be cautious.
Your CD ratio has increased to 75%. You still have enough headroom to grow. But going forward, do you intend to increase this to support your net interest margins, any level that you are thinking of internally?
Satyanarayana Raju: We want to maintain 1% or 2% above or below that 75%. If you consider that CRR, SLR together, 77.5% is an ideal. There is a possibility that we may move towards that 77%. Otherwise, we will be comfortable at 75-76%.
