With increasing competition in resource mobilisation, Canara Bank, a public sector lender, is set to enhance its branch network. The bank plans to open 250 new branches in the current financial year to focus on mobilising low-cost deposits, particularly Current Accounts and Savings Accounts (CASA).
Branch Expansion Strategy
K. Satyanarayana Raju, the Managing Director (MD) and Chief Executive Officer (CEO) of Canara Bank, revealed to Business Standard that the bank’s Board has approved the expansion plan. The new branches will primarily aim to boost CASA deposits. Currently, Canara Bank is leveraging artificial intelligence to analyze data and identify potential areas for new branches.
CASA Deposit Challenge
Raju acknowledged that CASA deposits are a weakness for the bank. As of the end of June 2023, the share of low-cost deposits had declined to 30.98%, down from 33% the previous year. The bank’s strategy includes opening branches in areas with significant potential to enhance CASA deposits. Last year, Canara Bank opened 200 branches.
Deposit Growth and Branch Rationalisation
As of June 2024, the Bengaluru-based lender reported an 11.97% year-on-year increase in total deposits, amounting to Rs 13.35 trillion. Following the merger with Syndicate Bank, Canara Bank closed 1,300 branches to benefit from operational synergies. This consolidation has provided the bank with the opportunity to open new branches in regions where it previously lacked a presence.
Impact of RBI’s Liquidity Coverage Ratio Proposal
Addressing concerns regarding the Reserve Bank of India’s (RBI’s) proposed tightening of norms for the Liquidity Coverage Ratio (LCR), Raju stated that the change will not negatively affect Canara Bank. The RBI mandates a 100% LCR, while Canara Bank’s internal policy is to maintain a ratio of 110%. Currently, the bank’s LCR stands at 140%. The RBI’s proposed rule is expected to reduce this level by 10-11 percentage points, potentially bringing the LCR down to 129-130%.
Future Outlook
Raju highlighted that banks capable of raising deposits will lead the market in the coming years. Canara Bank has anticipated this shift for the past 15 months, as evidenced by its double-digit deposit growth last year.
