Two-thirds of CSB Bank’s advances in Kerala are gold loans
CL Jose
KOCHI: What is Kerala market for CSB Bank?
While talking to businessbenchmark.news recently, an analyst put it in perspective.
More than being the home state for this centenarian bank, CSB Bank views Kerala as a rich deposit base; moreover, about two-thirds of the advances the bank has disbursed within the state is just gold loans that yields close to 12 per cent.
“So in Kerala, CSB Bank functions like a ‘gold loan company’ and in turn, the bank depends on the state for its deposit requirements to a good extent,” he added.
In business parlance or rather banking parlance, Kerala supports the bank on its funding needs by contributing close to half of its deposits or to be precise, 47 per cent of the bank’s deposits at Rs5,651.56 crore – as of March 31, 2024.
Low CD ratio
RBI has quite often raised its objection about the bank’s low disbursal of loans within the state in comparison with the deposits being raised from the state.
As against the total deposits of Rs13,968 crore raised from Kerala (as of end-FY24), the bank has disbursed only loans worth Rs5,651.56 crore within Kerala, thus working out a credit-deposit (CD) ratio of 40 per cent as of March 31, 2024.
Gold loan is lifeline?
As against a total deposits base of Rs29,719 crore, CSB Bank’s advances are to the tune of Rs24,572 crore as of March 31, and out of this, gold loan alone accounts for Rs11,818 crore representing 48 per cent of the bank’s loan book.
The high level of gold loans not only helps the bank in building a secured loan portfolio, more importantly, it frees up capital which would help the bank build assets in the future without needing fresh capital.
The bank sits on a comfortable capital adequacy ratio (CAR) of 24.47 per cent, which is the highest among the mainstream banks in the state. The bank’s tier 1 ratio alone accounts for an exceptionally high 23.10 per cent.
Interest expenses bite
While the interest income of CSB Bank grew by only 26 per cent from Rs2320 crore to Rs2927 crore, the interest expenses surged for the bank by 47 per cent when they soared from Rs986 crore to Rs1451 crore as of March 31, 2024.
This time around, the non-interest income made a mark for the bank as they staged a substantial growth of 85 per cent from Rs315 crore to Rs685 crore during financial year under review.
Notably, the processing fee increased from Rs99 crore to Rs151 crore and the commission income improved from Rs97 crore to Rs164 crore, both contributing to the non-interest income meaningfully.
IDBI Bank deal
The chief executive officer (CEO) and managing director of the bank, Pralay Modal, seems to have dodged a direct query with regard to the media reports on the move by Fairfax, the main promoter of CSB Bank, to buy a majority stake in IDBI Bank.
“I don’t have any information on this. I don’t think there’s anything that I am aware of or that can be shared with you on this,” Mondal added.
But he tried to drive home a valid point. “If I knew anything about the IDBI deal as is reported by the media, I would have gone for the Finacle core banking software on which the IDBI Bank currently runs; but we are going for Oracle,” he concluded.
