By CL Jose
‘CSB Bank, Federal Bank raise more, lend far less in Kerala’
KOCHI/February 04-2022: Kerala’s home-grown banks are taking a backseat when it comes to lending in their own state despite repeated cajoling from the Reserve Bank of India (RBI) to improve lending within the state.
The regional director of RBI had earlier raised concern regarding the constant decline of credit-deposit (CD) ratio in the state from 66 per cent as in March 2020 to 63.18 cent through September 2020, to 63.79 per cent as of December 2020, and to about 62 per cent towards September end, 2021 (gathered from sources).
Surprisingly, four banks headquartered in Kerala – Federal Bank, South Indian Bank (SIB), CSB Bank and Dhanlaxmi Bank, have figured on the list of 13 banks that enjoy the lowest CD ratio in the state. Kerala Bank that was launched with much fanfare, too, is not in a position to go full throttle in lending as around Rs35,000 crore remains parked in investments, mostly in Kerala government bonds.
CD ratio within a state means the level of lending these banks have made in the state as against the funds they have raised from that state. Hence a 35 per cent CD ration means the bank has lent within a state, only 35 per cent of the deposits it raised from that state, the lion’ share of its lending being deployed in other states.
The RBI official at the State Level Bankers Committee (SLBC) meeting held in Thiruvananthapuram (state capital) had exhorted State Bank of India (SBI), the industry leader, Federal Bank, the second largest bank in Kerala, CSB Bank and Dhanlaxmi Bank to take concrete measures (to improve volume of lending in Kerala) so that the good work done by other banks for the State of Kerala is not lost.
The RBI official had suggested all 13 banks (with low CD in Kerala) to submit the action plan for improvement of the ratio within three months.
Avid lenders, but not in own state
While the ‘lowest lender’ among those from the state is CSB Bank with 36.14 per cent CD ratio, Federal Bank is at 41.48 per cent, whereas Dhanlaxmi Bank and SIB are at 45.44 per cent and 47.44 per cent respectively, as of end-September 2021.
Talking to businessbenchmark.news, a former senior banker said Kerala with fairly good inflow of NRE deposits, has historically been an ideal ‘deposit hub’ for these Kerala-based banks.
But these banks are smart lenders outside Kerala as is manifested by their overall lending ratio. While CSB Bank remains the slowest lender within Kerala, it is the most avid lender in the pan-India market with an overall CD ratio of 81.92 per cent.
Likewise, Federal Bank’s CD ratio is at 78.15 per cent, whereas SIB is at 67.15 per cent and Dhanlaxmi Bank at 58.50 per cent as of September end, 2021.
