Canara Bank Focuses On Deposits To Meet Fiscal's NIM Target

Canara Bank is set to achieve its net interest margin guidance for fiscal 2025, despite an overall rise in the cost of deposits in the banking sector, according to the public-sector lender’s Chief Executive Officer and Managing Director Satyanarayana Raju.

Canara Bank’s NIM for the second quarter of the current financial year stood at 2.88%, a decline of 2 basis points from the preceding three months. At the start of this financial year, the bank had guided to achieve NIM in the range of 2.9%. It managed to maintain the NIM at 2.9% in the June quarter, but experienced a marginal dip in Q2.

Speaking to NDTV Profit, Raju said that the drop was due to the rising cost of deposits, and way lower than peers due to emphasis on resource management and improvement in its yield on advances.

“It was an impact of just 2 basis points. If you look at the industry and big banks, everybody has lost their NIMs from 12 to 13 basis points. We lost only 2 basis points because of our effective management of resources, as well as an improvement of our yield on advances,” he said.

The top executive highlighted that the bank managed to keep its cost of deposit steady at 5.7% in Q2. The yield on advances, on the other hand, grew to 8.77% in Q2 from 8.66% in the June 2024 quarter.

Raju said that the lender will stick to its strategy of managing resources and improving its yield on advances for the next two quarters to ease pressure on margins.

The increasing cost of deposits has also resulted in the bank focusing more on garnering its CASA (Current Account and Savings Account) deposits, he noted.

“Over the last 20 months, we have introduced 10 to 11 new products targeting some segments of the society. We have introduced several savings bank products targeting the youth, women, salaried employees, retired employees and the non-salaried class,” he said.

“Even in the current accounts space, we have targeted some new products. These products are giving some cushion in garnering low-cost deposits,” the top executive added.

Apart from this, the bank has taken other initiatives to maintain its NIMs at around 2.90%.

“Instead of only depending on term deposits, we are focusing on alternative resources like infrastructure bonds, where we raised Rs 10,000 crore in the first quarter. We are also raising short-term finance from the RBI window because we have an excess SLR of almost 8%,” Raju said.

“In the first quarter, we also withdrew our sanction on low-yielding advances in corporates that have saved us Rs 30,000 crore to 35,000 crore. That has also helped us increase our yields,” he added.

Shares of Canara Bank Ltd. traded 0.81% higher at Rs 104.6 apiece on the NSE, against benchmark Nifty's decline of 0.08% at 11:35 a.m.