CSB Bank playing safe with large gold loan portfolio

Gold loans grew 60 pc last year; now represents 42 pc of gross advances 

KOCHI/January 02-2020: The Kerala-based CSB Bank seems to be building its fortune around its ever-growing gold loan portfolio that on the one hand can be serviced with lesser capital, and on the other, is so much secured as it’s remunerative.

As the year or the third quarter (Q3) of the financial year has drawn to a close on December 31, 2020, CSB Bank’s gold loan portfolio has dominated the gross loans of the bank representing 42 per cent of gross loans.

And moreover, this asset class has grown by 60.36 per cent in the past one year alone. For CSB Bank, in a way, gold loans had driven the bank’s gross loans growth during the past one year.

CSB Bank’s gold loan portfolio has reached Rs5633.75 crore (Rs56.338 billion) representing 42 per cent of the total advances of the bank as of December end, 2020 – at Rs13,425.24 crore.

While the total advances grew by 22.64 per cent, from Rs10,947.28 crore to Rs13,425.24 crore during the past one year, the gold loan portfolio recorded a growth of 60.36 per cent – from Rs3513.25 crore to Rs5633.75 crore.

Deposits

The total deposits during the one-year period grew only 16.48 per cent, from Rs15,241.11 crore to Rs17,752.97 crore, of which, the CASA segment staged a better show at 23.88 per cent growth as its base expanded from Rs4353.22 crore to 5392.96 crore during the said period.

Interestingly, when the gross loan growth in absolute terms during the year was Rs2477.96 crore, most of it or about 86 per cent was contributed by the gold loan book alone that grew by Rs2120.5 crore.

Gold loan yield

The CEO and MD of the bank, C VR Rajendran, had said that the bank’s yield on gold loans improved from 12.22 per cent in the first quarter to 12.53 per cent during the second quarter.

He said this could improve to 13.5 per cent, which according to him indicated that the growth could be achieved without compromising on yield.

The RBI decision in August allowing the banks a higher loan-to-value of up to 90 per cent has literally helped banks grab a sizeable market share from the gold loan companies.

CSB Bank has acknowledged that its gold loan book has helped it improve its capital adequacy ratio from 18.93 per cent to 19.69 per cent as of September end, 2020.

This was possible due to reduction in the market risk-weighted assets between June 30, 2020 and September 30, 2020, while the credit risk-weighted asset increase has trailed loan book growth as bulk of the growth was in gold loans

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