Gold loans account for 35% of our loan book and can go up to 45%: CVR Rajendran, Managing Director & Chief Executive, CSB Bank

Kerala-based CSB Bank reported a 180% year-on-year (y-o-y) increase in its second-quarter net profits at Rs 68.9 crore despite increase in provisions and contingencies significantly. CVR Rajendran, managing director & chief executive, CSB Bank, tells Rajesh Ravi about the bank’s performance and outlook.

What is the reason behind the 180% increase in net profit the bank had reported in the second quarter?
It is mainly driven by volume growth. Interest income is the main income. Our yield on advances has gone up substantially and yield on the treasury has also gone up by 40 bps, whereas the cost of the deposit has come down by 30 bps and the Net Interest Margin (NIM) has increased for the quarter. We could also keep all the expenses under control.

The bank has almost doubled the provisions. What is your outlook on slippages?
We don’t anticipate any major slippages during the current year. The provision coverage ratio is around 84% and the general provisions are about 6%, so the total is 90%. We have provisioned Rs 60 crore for Covid-related slippages and it should be sufficient. We have made a fair assessment that Rs 75 crore may come as slippages. Only `9 crore is the additional NPA (non-performing assets) identified during this period and this cannot be declared as NPA due to the moratorium, but still, we have provisioned for it.

Gold loan is now seen as a driver of growth. What is the share of the gold loan in your loan book?
The gold loan has grown 47% year-on-year and it is the trend and now one of the sought-after products. It is the easiest one to get. It will continue to grow at the same pace for one or two quarters. We are getting a lot of requests for gold loans. Gold loans now account for 35 % of our loan book and it can go up to 40-45%.

Regarding collections, how many customers who availed the moratorium started payment in September?
We are not worried about the collection side. Up to August 30, as much as 47% of instalments fallen due on the moratorium accounts are collected. September figures are yet to be taken. Only 1.24% of my total customers have not paid any instalments during the six months, which is a very low number. Our collection efficiency of the captive portfolio is 80-85 %.

Going forward, where do you see growth coming from as you are a bit conservative on the loan book?
Our loan book is growing and in the desired sectors. We identify sectors that can go bad like cashew, gold jewellery manufacturing , steel-related activities and have reduced our exposure. But, we are growing in other sectors like textiles, food processing, government constructions, etc. We have selected various sectors such as SME, MSME, agri sectors,two-wheelers, etc., where growth can come and an incremental one will be visible in some time.

What about branch expansions and new product launches?
We are opening 100 branches in the fiscal and 35 branches are already open. Another 35 branches are in the pipeline. We are looking at new premises for another 30 branches. We are going to launch new products from January once our new team is on board.