Canara Bank Conservative On Growth; Cuts FY26 Credit, NIM Guidance

Given the current macro environment and tight liquidity conditions, Canara Bank has curtailed its credit, deposit and margin guidance for the next financial year, Managing Director and Chief Executive Officer K Satyanarayana Raju told NDTV Profit.

"Our expectations are near to reality and that's why we expect credit growth of 10% next year. This is because we are reaching optimal level of CD ratio and we may have to garner deposits also at 10%," Raju told NDTV Profit in an interview.

The state-owned bank has cut its net interest margin for the March quarter to 2.8% from 2.9% because of tight liquidity conditions. If such conditions persist, NIMs of the bank will remain around 2.75-2.8% in fiscal 2026, he said.

The Canara Bank CEO added that the bank does not expect NIMs to go to 2.9% any time in the near future as cost of deposits is a major concern.

The reason behind this conservative guidance is because bulk deposits are 7.9-8% for the bank this month, which is quite high, prompting its focus more on retail term deposits as well as current account and savings account.

"We are focusing on retail term deposit growth. In the March quarter, we will cross 9% deposit growth. We will grow advances over 10%, so that we can touch CD ratio of 77%," he added.

Canara Bank reported over 12% year-on-year rise in net profit for the quarter ended December at Rs 4,104 crore.

Net interest income of the public sector lender fell 3% to Rs 9,149 crore from Rs 9,417 crore in the year-ago quarter. Consequently, the net interest margin was 2.83% as compared to 2.88% a quarter ago.

Gross advances of the bank rose 9.55% to Rs 9.87 lakh crore. Retail, agriculture and micro, and small and medium enterprises loan book grew 12% YoY to Rs 5.95 lakh crore, followed by an 8.08% growth in corporate and others to Rs 4.53 lakh crore.

The bank's domestic deposit stood at Rs 12.57 lakh crore as of Dec. 31, with a growth of 7.76%.

On the Reserve Bank of India's proposed liquidity coverage ratio norms, Raju said that the bank has assessed the impact on its LCR and it is working out about 11-12 basis points. As of December-end, Canara Bank's LCR was 123%, as against the regulatory requirement of 100%.

"Even if the LCR guidelines are implemented from April 1, the impact on our LCR will not be much, we will still maintain it over 110%," he said.

On Monday, the RBI announced three special measures to boost liquidity conditions in the banking system through open market operation purchases, long-term variable rate repo auctions and dollar-rupee buy/sell swaps worth up to Rs 1.5 lakh crore. This is over and above the Rs 50,000 crore daily VRR auctions that the central bank has been conducting.

As of Jan. 27, liquidity in the banking system was in the deficit of Rs 3.1 lakh crore.