Kerala, a fund-raising hub for its banks?

Federal, SIB, CSB, Dhanlaxmi enjoy very low CD ratio in state

KOCHI: Has Kerala become a ‘fund-raising centre’ for other states with bulk of the bank deposits sourced from the ‘God’s Own Country’ being routed to elsewhere, especially to its South Indian counterparts like Andhra Pradesh (including Telengana) and Tamil Nadu?

Ironically, the said trend is strengthened by none other than the Kerala’s own nonagenarian banks such as Federal Bank, South Indian Bank, Catholic Syrian Bank and Dhanlaxmi Bank.

“The avenues for lending are far less in Kerala compared with the other states in the South. Moreover, most banks have put on hold the corporate lending, at least for the time being,” a top official with the credit department of a Kerala-based bank said.

While the combined credit-deposit ratio (CD ratio) – the percentage of loans disbursed within the state vis-à-vis the deposits raised- within the state is 64.79 per cent (Pvt banks) and about 64 per cent (PSU banks), that of the Kerala-based banks as a club is much lower compared with many other outside banks operating within the state.

As per the data released by State Level Bankers’ Committee (SLBC), Kerala, the CD ratio enjoyed by South Indian Bank (SIB)  within the state is the highest among the banks from the state, at 58.56 as of September end, 2018, whereas that of Federal Bank was 44.59 per cent, Catholic Syrian Bank at 36.54 per cent, and Dhanlaxmi Bank’s being at 49.07 per cent.

However, these banks are not inherently low CD followers. Country-wise, their CD ratios (as of March end, 2018) are far higher with Federal Bank enjoying around 79 per cent; South Indian Bank at 73 per cent; Catholic Syrian Bank at 64 per cent and Dhanlaxmi at a much lower 56.53 per cent, the reason being the PCA curbs until recently.

It’s the private sector banks like City Union Bank (123.77 per cent); HDFC Bank (104.79 per cent), IndusInd Bank (326.48 per cent), Karnataka Bank (106.10 per cent) etc. and some PSU banks that have worked as backstops to hold Kerala’s combined CD ratio above 60 per cent.

Among the other south Indian states, while the CD ratio of Tamil Nadu moved from 114.65 per cent to 113.52 per cent during the past decade, that of Andhra Pradesh (along with Telengana) rose substantially from 90.48 per cent to 123.82 per cent during the period.

Though still staying close to 70 per cent, the CD ratio of Karnataka has fallen from the levels of 78 per cent a decade ago. Among the other major states, Gujarat has a CD ratio of 75.56 per cent, up from 66.53 per cent, a decade ago, whereas Maharashtra, the most industrialised state and the commercial capital of the country, enjoys a high CD ratio of 106.86 per cent for obvious reasons, as of September end, 2018.

The Kerala banks may have their own reasons for not parking bulk of their funds in Kerala. Top officials of some of these banks have confided to at different occasions that they had burnt their fingers not only with large corporate loans but with several SMEs too adding to their NPAs and leaving the banks high and dry.

Talking at Dhanam Banking & Finance Conference recently at Kochi, the chief executive and managing director of South Indian Bank, VG Mathew, has also underlined the need for banks to spread their wings to wider markets.

“Retail penetration is on the higher side and the banks that eye a healthy expansion trajectory will have to look beyond Kerala and even South India,” said Mathew.



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