Narrative reset: CASA / rate-cut transmission anxiety (Q1FY26) faded; ECL Rs.

On margins - it has panned out exactly the way you put it last time (no more than 5 bps). From now on, do we expect margins to stay stable or improve if there are no further cuts?

So, one more quarter it may continue to be stable, Madam. There afterwards, you can say there is some improvement may happen.

What is your outlook on CASA now? Bank's CASA has been traditionally low - how do you view it in the system environment context?

When the total balance sheet is growing at 14%, it is a big challenge for us to grow CASA to match. However, several initiatives - Customer Relationship Manager concept, feedback mechanism, Business Around App - because of these we are seeing almost above 10% growth in CASA. There is incremental growth of ₹20,000 crores in savings bank individuals. Retail Term Deposits have also grown more than ₹30,000 crores in just half year - record growth in last 7-8 years. We have given guidance of 32% and will work hard to achieve it. We were giving 32% keeping in mind business grows at 10.5%, but now we are growing at 14%, so we have to work harder.

On the new ECL guidelines - once implemented, what do you see as run rate of Credit Cost? Will it be higher than now?

I do not think it will have impact so much on Credit Cost. We have been working for last 2 years - wherever the scope is there, we are additionally providing. Even in standard assets when SMAs are there, we are providing in standard assets provisioning itself - that is nothing but expected Credit loss. Our SMA position at ₹5 crore and above is ₹7,500 crore. Out of this ₹5,000 crores already we have provided, the left out is only ₹2,500 crores. Implementation is effective from 1st March 2027 - 15 months' time. Credit Cost may come down maybe around 5.50 or point below 5.50. It will be well within less than 1% only.

But there will be many accounts below ₹5 crores - that is where you will have to make Stage 2 provisions because below ₹5 crore accounts usually have early delinquency.

Earlier even entire below ₹5 crore and above ₹5 crore entire combined entity we used to have around 5% of SMA. Now, it has come down below 3%. Only less than 3% is there. In SMA 0 there is no such issue, only 1 and 2. 1 and 2 drastically has come down. Our profits are growing very comfortably - current quarter more than 18% year-on-year growth in Net Profit. This year we are expecting Net Profits may cross ₹20,000 crores. Last year we were at ₹17,027 crores. These additional profits will give us comfort.

In terms of growth - your growth has been good. Going ahead do you see it accelerating? Are there green shoots in October making you more confident about growth, corporate or SME?

MSME we are expecting that definitely by end of year we may end up at above 15% growth - as on date 12.70%. Corporate we are growing at 10%, we want to grow around 10%-11% only - do not want to compromise on bottom lines. Two days back our Board Credit Sanction Committee has cleared ₹26,000 crores worth of loans in one meeting. Our RAM sector will grow much faster than corporate sector - strategy is RAM 60% and corporate 40%. 60-40 ratio we want to reach in next 1-1.5-year time.

CASA was 30.98% 6 quarters back, still 30.69% today - something needs to be worked on. And NIM is going down from 2.9% to 2.50% - where are we heading and how are we controlling this continuous fall?

On CASA - 2-3 years back balance sheet used to grow at 5-6% and maintaining CASA percentage was easy. Now balance sheets growing at 13-14% so 14% garnering and maintaining CASA growth is a big task. First-time year-on-year growth more than 10% in CASA. Several segment-wise targeted products and initiatives - Customer Feedback mechanism, Relationship Manager, Business Around App. New product for farmers planned, and Gig workers. ₹20,000 crores incremental growth in SB individuals in one financial year - record in 8-9 years. Two H1 CASA products launched in SB and Current account targeting NGOs, societies, pilgrim centers. On NIM - 45%-46% of our loan book is linked with Repo rate, benefit extended immediately, but 90% of our deposits are 1-year deposits - those continue at earlier rate. Stress on NIMs. NII quarter-on-quarter ₹130 crores increase - June was ₹9,009 crores, now ₹9,141 crores. Next quarter same or little improvement. Won't be further dip below 2.5 - maintained at 2.5 or above. Fourth quarter onwards uptick - regain to 2.9% or 3% if no further rate cuts.

What kind of one-off gains can we expect from stake sale in Canara Robeco and Canara HSBC? And PSLC was very strong this quarter - should we expect that to continue in next 2 quarters?

We are the first banker to list 2 subsidiaries simultaneously in current financial year. Got benefit of almost ₹2,000 crores. After removing IPO expenditure, ₹1,935 crores. Have not booked anything in previous quarter - entire amount will be booked in current quarter. PSLC is our business tool - whenever we need we can sell. Surplus of almost ₹25,000 crores which we can sell. Will see if selling in December is required or in March. We are the only big supplier in Indian Banking scenario for PSLC.

Do you have any views on the merger as well? Do you see that happening in next 12-15 months? Could Canara Bank be part of that?

See, till this moment no formal or informal discussions have happened with Canara Bank regarding any mergers or amalgamations from DFS.

On Current account balances - sharp growth this quarter after decline last quarter. What really happened here?

Current account, we have some institutional deposits. Quite often we get the money, it goes out and that benefit you will get. Even March, there was a steep increase. Even now, current balance is less than March. So we have some institutional deposits, sometimes it comes heavily and that quarter you get the benefit.

On margin - one year MCLR has come down by roughly 35 bps in last 6 months. How much of repricing impact is factored on yields currently?

45% of our loan book is under MCLR. MCLR resetting mostly happens on annual basis - majority of accounts. 6 months over, then remaining 6 months - 50% of this 45%, approximately 25% of the loan book is repriced and remaining yet to be repriced.

Last quarter we had a one off in the margin. Is there any one off this quarter?

The last quarter one off the margin is PSLC only, except that nothing is there. PSLC every year first quarter we are getting. This year second quarter also we got because we have excess priority sector and there is demand. We got benefit of 900 crores.

How much of the interest on return of accounts is booked in interest income line? And how is standard provision quite material up?

Approximately 450 crores sir. On standard provision - almost 500 crores. Additionally 550 crores. One account, some drinking water project of Telangana, often appearing in SMA1 or SMA2 - on precautionary measure we provided 380 crores towards that account. That is in standard provisioning only. Earlier for one more such irrigation project we provided 580 crores in previous two quarters.

Are those accounts still in SMA? And on the agri book of 2.7 lakh crore, how much would be gold loan? And the stake sale amount - will it flow through P&L or AFS reserve?

One is in SMA1. One is out of SMA. Agri direct is one lakh eighteen thousand. Remaining is gold loan book. On stake sale - it will be on P&L only. So whatever the 1935, after adjusting the expenses that will be taken into profit and loss.

Can you quantify the interest on income tax refund received this quarter? And on recoveries from written off accounts - expectation for full year?

It is around 400 crores. On recoveries - almost 660 crores in the first half of this year. We are confident we can recover approximately 5000 crores. Third quarter we are expecting same lines of 17 to 18 hundred crores and it will continue. Every year, 5000 crores approximately we can recover from written off accounts.

Does this hold for FY27 as well, tentatively? And can you give breakup of slippages across segments?

Yes sir. 750 crore agriculture, 350 crore retail, 900 crores MSME, total 2000 crores.

Does CET1 of 12.2% include profit for the quarter and first half? And what is the NIM adjusted for interest in IT refund?

Yes madam. CET1 this particular one quarter - almost 55,000 crores growth in advances demanding CET1. From 12.29 to 12.21. Because we are earning good profits we are able to maintain 12.2 above. Reason behind is we have grown 14% in advances, particular quarter itself 55,000 crores advances. IT refund is only 400 crores - already told in previous question.

You spoke about 5000-7000 crores of recovery from technical write off of assets. As of today, what kind of pool is available at historical value?

71,000 crores sir. Not the current value - that's what we have provided 100%. Provision is book value. Out of that 70,000, yearly 5000 you can observe. Because of our comfortable profits we keep continuing the written off - fresh accounts wherever 100% provisions are there, we are again writing off some accounts technical write off, and that portfolio is able to maintain that level. So 70,000 is available for recovering next few years.

RBI took lot of measures for new initiatives for credit growth - M&A, stock market, equity lending, other initiatives. Any thoughts? How would you proceed on these products?

Anticipating this decision only, we launched last April online loan against mutual funds STP process - became very successful. We are second public sector bank growing in that market comfortably. Now limits have been increased. We are also focusing on revamping subsidiary Canara Bank Securities Limited - RFP floated for onboarding new technology platform. Planning to inject some capital. Already listed three subsidiaries - Canfin Homes, Canara Robeco and Canara HSBC. Now focusing on fourth one to strengthen so we can unlock future value. Will indirectly help CASA also - customers dealing in capital market we are unable to serve in demat accounts comprehensively, we want to tap that business.

Any thoughts on M&A financing?

Definitely sir we are working on that. Creating a policy now on the same draft guidelines. Eagerly waiting for opportunities. Earlier this opportunity was not there. We know we lost some AAA rated transactions. Already sending officers and executives for training, on the job training, deputed somebody for foreign also and some local reputed institutes. Within one quarter policy and capability building may happen, then we will be very active in financing those acquisitions.

What would be undisbursed credit lines and new sanction pipeline visibility? And how do you see balance by year end on RAM versus corporate - 60:40?

Approximately 50,000 to 55,000 will be there sir, because two days back only we sanctioned 26,000 crores. Earlier sanctions almost 30,000 crores. More than 50,000 crores undisbursed loan in corporate sector alone. On RAM:Corporate - 59:41 by end of this March sir. Next year we feel that it will be 60:40.

How is your digital spend looking like - on budget, exceeding budget or you'll increase the budget? And on M&A financing IBA platform?

Last four years continuously invested almost near to thousand crores every year. This year budgeted almost 600 crores because many things onboarded already, now working on return on investment. With 70 crores investing exclusively on cyber security. Will continue to invest on digital. Last two quarters our market share both in deposit and advances has gone up. On consortium - we acquired capabilities in underwriting big projects on sole basis and then down selling. Our exposure almost 12,000 crores in two projects underwritten. On IBA platform for M&A - so far no such initiative has been taken. We also will be part of that.

You mentioned 3% of book as overall SMA - is that SMA 0, 1 and 2 or only 1 and 2? And on stake sale of 1900 crores benefit in Q3 - are you looking at utilizing that to create buffer provision?

SMA 0 1 and 2 all together is less than 3%. On stake sale buffer - even when we don't have one-time benefit, last consecutively three four quarters we are providing access provisions towards standard assets wherever towards meeting SMA2 or SMA1. That strategy will continue because from 1st April 2027 we have to provide for expected credit loss. To possible extent we are creating buffer now itself. Not entire thing - partly, because still our PCR is around 94%. Some banks at 97-98% - scope to build PCR percentage.

My question is regarding recent changes in regulations of gold loan by RBI. How do you see this impacting our business? Will it become difficult to give loans or has process become easier?

Actually they are very proactive for doing much better business in gold loan because earlier LTV ratio used to be up to 75%. Now RBI has increased it up to 85%. That comfort they have given. At this moment we are not using that - restraining ourself to below 75% including interest component. For agriculture loan, given the benefit that if partially or fully collateralized even then it will be considered as agriculture loan. One more initiative for renewals up to five lakhs - by paying interest they can renew loans. These three things helped us in growing much faster than earlier.

Can we say Canara Bank expanding its gold loan business just the way other gold loan NBFCs do? Will it be possible for us? Do you see gold loan as more profitable?

In India we are the number one banker - I don't think any bank or NBFC near to us in gold loan. Our gold loan portfolio crossed two lakh eleven thousand crores. Definitely gold loan is more profitable - does not require capital. Return is almost 8.75 to 8.8%. Slippages will be meager, almost less than 1.1%. Better returns, better safety, better security - but handling gold loan requires professionalism. Canara Bank is famous for gold loans for decades together - established practices, good practices.

Can you explain particularly what makes handling gold loan so difficult? Is it procedural problem or legal issue?

You should have proper systems and procedures in safe keeping, appraising. Appraiser should be made available. Re-appraisals, cross verifications and safety, keeping safe keeping of customers gold. Lot of infrastructure required. We have created it being an established bank - processes and procedures are very clear and there is very stringent monitoring systems in the bank. Maybe little difficult for people who are first time starting it, but many other institutes can compete with us now, but nobody is nearer to us.

Total gold loan is 2.11 lakh crore - how much is retail and how much is agri? And how much was it last quarter? And do we have any policy to provide on SMA like 380 crores on Telangana drinking water project?

Approximately 63 lakhs. 63,000 crores is retail. Last quarter June 30th was approximately 195 - now it is 211. Retail in June was 55-56. On policy - policies will be there proactively subject to availability of comfortable margins. This is proactive policy adopted by board from time to time. It's not regulatory requirement but when comfortable, better to provide more and more because regulator is expecting to shift to expected credit loss system from 1st April 2027. We are in advance creating that buffer so there will not be much impact on bank balance sheet. Not that these accounts are going to slip to NPA - none of these accounts will slip to NPA. But in prudent banking we want to create buffers.