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CSB Bank Bets On Retail Credit To Drive Long-Term Growth

Gold loan to be the 'cash cow' for the bank in the near term.

<div class="paragraphs"><p>A branch of CSB Bank in Mumbai. (Photo: Usha Kunji/ BQ Prime)</p></div>
A branch of CSB Bank in Mumbai. (Photo: Usha Kunji/ BQ Prime)

The retail business of CSB Bank Ltd. will be the largest and the main driver of growth in the long term, according to Chief Executive Officer Pralay Mondal.

However, till then, gold loans will continue to be the "cash cow" for the bank, Mondal, who is also the managing director, told BQ Prime. "The bank has achieved a strong credit growth in the third quarter on the back of sweating the system for gold loan business and leveraging the existing infrastructure."

During the third quarter, CSB Bank's gold advances increased by 9%, while non-gold advances increased by 2%.

Though the retail, wholesale, and SME segments have started contributing to the bank's loan growth, it will take 18 to 24 months to show results, the CEO said.

However, Mondal expects the retail business to become the largest segment, contributing 30% to the overall loan portfolio by the end of 2030. This will be followed by gold loans, which will contribute 20%, and the remaining 50% will be divided equally between SME and wholesale loans, he said.

Deposits And Liquidity

The bank's current account and saving account, which indicates the deposit level in the bank, stood at 31.4% for Q3FY23.

"The bank is focused on building a strong liability franchise. It will take sometime to build CASA growth and aims to maintain it in 31-32% range in the near term," Mondal said.

The bank's liquidity coverage ratio, which shows the banks capability to meet short-term obligations, is 120%, he said. The cost of funds is likely to rise for the banking sector as a whole during the thrid quarter due to the rate hike by the Reserve Bank of India.

Mondal is happy with bank's net interest margins at 5%, if growth trajectory is right.

The bank's opex may rise and cost to income may come down to 45% by 2030 from the current 55-60%, he said. Thus, the focus is to improve NII from hereon, Mondal said.

Income from priority sector lending will be good in FY24 due to higher base in FY23, while credit growth will be similar to those reported in FY23, Mondal said.