KOCHI: CSB Bank's aggressive lending growth is running into a familiar banking scenario: the need to mobilise more deposits to fund further expansion.
The Kerala-based lender reported a credit-deposit (CD) ratio of 90.39 per cent at the end of September 2026, with advances growing 22 per cent year on year against deposit growth of 18 per cent. The high ratio underscores the need for strengthening its deposit franchise as the bank enters a new phase of expansion.
Managing director and chief executive officer Pralay Mondal said the bank's ability to sustain faster balance-sheet growth would depend on how quickly it could build its liability franchise. Although the bank has the capacity to expand lending, management does not want to accelerate retail credit indiscriminately before securing a stronger base of deposit customers.
CASA low at 18.96%
CSB's CASA ratio stood at 18.96 per cent, leaving it reliant on term deposits and other funding sources alongside its current and savings accounts. The bank has also used domestic and foreign-currency borrowings, certificates of deposit (CDs) and refinancing facilities to manage funding costs and maturities.
The bank's immediate priority is to attract more current-account customers, followed by savings-account mobilisation. Mondal expects CASA to grow faster than term deposits from FY2028 onwards, which should help improve the deposit mix and reduce the overall cost of funds.
The bank's cost of funds stood at 6.55 per cent, and management aims to bring it down to around 6 per cent in FY2028. That reduction will be important as CSB diversifies away from gold loans and expands corporate, SME and other retail lending.
The challenge is that building a deposit franchise takes time. Management has acknowledged that even a sharp increase in customer numbers does not immediately translate into equivalent growth in deposits. Until the liability base strengthens, the bank expects to retain some dependence on larger-ticket deposits and market-based funding.
The CD ratio alone does not indicate a liquidity crisis or establish a regulatory breach. But it highlights the funding challenge facing a bank seeking to sustain loan growth substantially faster than the banking system.
