KOCHI: The relentless growth in gold loans at CSB Bank is set to hit a speed breaker, with the Kerala-based lender planning to slash the segment's share in its loan book from around 53 per cent to 32 per cent by 2030, marking a decisive shift in its lending strategy.
The bank, which has built a substantial part of its lending franchise around gold-backed advances, is now looking to diversify its portfolio by accelerating corporate, SME and retail lending. The immediate target is to bring gold loans down to around 50 per cent of total advances by the end of the current financial year, managing director and chief executive officer Pralay Mondal said during the bank's Q2 FY2027 earnings call.
The proposed shift is significant because gold loans continue to be one of the bank's strongest growth engines. The portfolio expanded 36 per cent year on year in the September quarter, against 22 per cent growth in overall advances. Corporate banking also delivered strong growth of 44 per cent.
The bank's strategy, therefore, is not a retreat from gold lending, but an attempt to prevent the segment from dominating its balance sheet as other businesses scale up.
SME growth to recover
Mondal said the bank had consciously moderated gold loan disbursements to ensure a more balanced contribution from its different lending verticals. The bank expects SME growth to recover after addressing problems in its portfolio, while wholesale banking is gaining momentum. Retail lending beyond gold will expand more gradually, supported by the development of a stronger deposit franchise.
The bank has also set a longer-term target of reducing gold loans to 32 per cent of its overall lending portfolio by 2030.
The change comes against the backdrop of a business in which reported disbursements can be influenced by repeat borrowing. Mondal disclosed that when the bank's gold loan portfolio was around Rs19,000 crore, annual disbursements were approximately Rs16,000 crore, partly because customers closed and rebooked loans. "Such transactions were counted as fresh disbursements," Mondal added.
Regulatory changes and the bank's decision to stop some of these close-and-rebook transactions have since reduced reported disbursements, although the outstanding gold loan portfolio continues to grow.
CSB's challenge will be to reduce gold's share without compromising profitability. Management believes the bank can achieve a more diversified lending mix without hurting its return on assets or return on equity.
