Canara Bank is fine-tuning its gold loan portfolio in line with regulatory guidance, based on ongoing discussions, said MD and CEO K. Satyanarayana Raju in a conversation with Narayanan V. The flexibility to source low-cost current and savings account (CASA) deposits will likely to emerge only by the third or fourth quarter, after factoring in expected rate cuts. Excerpts:
Lenders across the board are focusing on gold loans. Is this a segment you are focusing on as well?
Gold loans have always been a key focus area for us. In fact, 62% of our branch network is located in rural and semi-urban areas, and over 65% of our branches are in South India. These factors give us a strong position to generate consistent demand for gold loans. Our gold loan portfolio stands at Rs 1.81 lakh crore — the largest among all lenders in the country.
Last year, we stopped lending for gold loans for agricultural purposes. Instead, we launched a retail gold loan product for metropolitan customers for consumption purposes, and that product has been well-received. That is also one of the reasons why our retail advances jumped 43% year-on-year to Rs 2.23 lakh crore during Q4FY25.
Our gold loan portfolio grew by 19% last year, following 30% growth in each of the preceding two years. However, we are now fine-tuning our gold lending portfolio by taking cues from regulatory guidelines through discussions or draft norms, which may moderate our growth. That’s why we are expecting our gold loan portfolio to grow conservatively at 15%, instead of the 30–35% level.
Yield on advances improved 12 bps to 8.83% as of March 2025. How will this play out this year?
Our retail advances are giving a yield of 9.5%, MSME around 9.9%, agriculture gives 8.8%, and corporate is at 8.21%. These are the actual yields as of the date. But retail and MSME advances are linked to the repo rate. Already, two rate cuts have happened, and we expect one or two more. So, my yield on these two—retail and MSME—will come down steeply compared to agriculture loans and corporate advances because they are linked to MCLR. The rate cut transmission in MCLR happens gradually, not immediately like the repo.
So definitely, the yield may come down a little bit when the repo rate comes down. But we have to see how far we will be successful in reducing our cost of deposit proportionately. You can’t stop the yield from coming down when the repo rate is down. The only thing is that our efficiency should reflect in our cost of deposit reduction. We are very cautious on that matter — in the first week of April itself, in some buckets, we already reduced the rate of interest. Even in bulk and CDs, we drastically reduced our card rates.
We have already got Rs 6,000 crore in retail term deposits, and we don’t need more than ₹10,000 crore in retail term deposits. So, we want to play very cautiously with the cost of deposits. Only then can we manage the yields and the net interest margins.
When do you think high deposit rates will peak out?
After every rate cut, it takes six months for banks to reprice deposit rates, while lending rates are repriced the next day. During that period, banks have to bear the pressure. We’ve already had two repo rate cuts, so at this moment, sourcing low-cost deposits is still a challenge.
But once another one or two rate cuts happen and the repo rate comes down to around 5% or 5.5%, I think deposit rates will also come down drastically. Then, sourcing low-cost deposits may become comparatively easier. We can say that in the third or fourth quarter, we might have a little more flexibility in terms of sourcing low-cost deposits.
We are strengthening our field functionaries and working on reconnecting our staff members with customers because technology has created a bit of a disconnect. We are rebuilding the gap between customers and branch staff. We’ve given a call that each individual staff member has to approach customers and canvas for deposits. Such campaigns will continue during this financial year.
From April onwards, we have been running a recurring deposit campaign, and that will help us. We are also planning a specific savings bank campaign starting June 1. We strongly believe that if you rebuild connectivity with your customer, you will get the deposits. Through such staff campaigns, we got Rs 17,000 crore in deposits in the last quarter.
What is your recovery target for FY26?
We have taken a stand over the last two years that our recovery and upgradation must be more than our slippages during that period. That policy is continuing, and even today, we are implementing it with the same tempo.
In FY25, our net slippages were Rs 8,196 crore, but total recovery was Rs 12,891 crore. That is the reason you can see a steep decrease in our non-performing assets (NPAs). Our Gross NPA ratio improved sharply to 2.94% as of March 2025 from 4.23% a year ago. Net NPA also fell to 0.70% from 1.27%. We have guided for GNPA and NNPA ratios of 2.5% and 0.6%, respectively, for FY26.