State-owned Canara Bank has announced its plan to spin off its credit card vertical into a separate subsidiary, according to Managing Director K Satyanarayana Raju. This move is aimed at improving the efficiency of its credit card business and facilitating growth in the segment.
In an interview with the Economic Times, Raju stated that the bank is currently preparing a roadmap for listing its life insurance and fund management businesses. This is part of the bank’s strategy to focus on its core areas of retail, agriculture and MSME lending, and to slow down its lending to corporates. The aim is to maintain a net interest margin above 3%.
Canara Bank’s focus on retail, agriculture and MSME lending has helped it improve its asset quality and profitability. The bank’s gross non-performing assets (NPAs) fell to 7.49% of its total advances as of December 2022, from 8.19% a year ago.
The bank is taking steps to expand its low-cost deposits to improve margins and profitability. Raju stated that Canara Bank is targeting a current account and savings account (CASA) ratio of 50% by March 2023, up from 41.34% as of December 2022. This will help the bank reduce its cost of funds and improve its margins.
Canara Bank is also investing in technology to improve its digital capabilities and enhance customer experience. The bank is focusing on automation and digitalisation of its processes to reduce costs and increase efficiency. It is also working on developing new digital products and services to meet the changing needs of its customers. The bank has been focusing on increasing its savings deposits, which are considered a low-cost source of funds. It has also been reducing its reliance on bulk deposits, which are expensive and can have a negative impact on margins.
The bank is optimistic about the future and is confident that it can achieve its targets. Raju stated that the bank is aiming to achieve a credit growth of 8-9% in the current financial year, driven by retail and MSME lending. The bank is also targeting a net interest margin of 3% and a return on assets of 0.5% in the current financial year.
The spin-off of the credit card business into a separate subsidiary is expected to be completed in the current financial year. The move is expected to enable the bank to focus more on its core business areas and improve the performance of its credit card business.
The bank’s plans to list its life insurance and fund management businesses are also expected to be completed in the current financial year. This will help the bank unlock value in these businesses and improve its overall performance. The bank has also been investing in technology to improve its operational efficiency and reduce costs. It recently implemented a new core banking system, which will help streamline its operations and enable it to offer a range of digital services to its customers.
Canara Bank’s focus on retail, agriculture, and MSME lending is in line with the government’s push to promote these sectors, which are considered key drivers of economic growth. The bank’s move to slow down lending to corporates is also in line with the government’s efforts to reduce the concentration of lending to a few large corporate borrowers. Canara Bank recently launched its digital-only banking platform, Canara DiGi O, which allows customers to open a savings account and access a range of banking services through their mobile phones.
Overall, Canara Bank’s focus on retail, agriculture and MSME lending, along with its efforts to expand low-cost deposits and invest in technology, is expected to help the bank improve its profitability and efficiency. The spin-off of the credit card business into a separate subsidiary and the listing of its life insurance and fund management businesses are also expected to be positive developments for the bank.
