State-owned Canara Bank plans to sell its excess priority sector loans in the ongoing quarter to compensate for the stress on margins due to moderation in interest rates. During the quarter ended June 2025, the bank earned Rs 1,248 crore as commission by selling priority sector loans.
Despite sale in the first quarter, the total priority debt stands at 45.63% as against regulatory requirement of 40% of the total loan, Canara Bank MD and CEO K Satyanarayana Raju told PTI.
"We have a cushion under priority sector space. There is demand in the market and we may take advantage of the Priority Sector Lending Certificate sale during the current quarter itself." he said.
Asked about impact of moderation in interest rates, Raju said, main concern for the ongoing financial year would be Net Interest Margin and the guidance of 2.75% seems difficult at the current juncture due to 100 basis point rate cut by the RBI so far this year and expectation of another one as inflation has come down below 3%.
Whether the rate cut happens in August or October policy, one has to wait and watch, he said, adding, therefore pressure would be there in the current quarter as well and slight improvement can be witnessed in the third and fourth quarters.
Besides, he said, stake sale in two subsidiaries would provide some comfort during the year.
The bank is aiming for listing of one of its subsidiaries in the current quarter and another in the next quarter, depending on the regulatory approval, he said.
Canara Bank has already initiated the process for listing of asset management joint venture Canara Robeco AMC. The bank is planning to sell its 13% stake in the mutual fund arm through initial public offering.
Besides, it is also planning a listing of its life insurance joint venture, Canara HSBC Life Insurance Company. Canara Bank has already approved the process of diluting a 14.5% stake in its life insurance venture Canara HSBC Life Insurance Company.
Despite stake dilution, Raju said, the bank would continue to be the majority owner in both entities and continue to earn substantial fee income by selling their products.
For the first quarter ended June 2025, Canara Bank reported a 22% growth in standalone net profit to Rs 4,752 crore as against Rs 3,905 crore in the same quarter of the previous fiscal year.
The total income rose to Rs 38,063 crore during the latest June quarter from Rs 34,020 crore in the same quarter of fiscal 2025.
Interest earned by the bank increased to Rs 31,003 crore compared to Rs 28,701 crore in the June quarter of the previous financial year.
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