Canara Bank Will Maintain Profit Margins while Expanding Corporate Loan Portfolio According to the MD
Canara Bank Outlines Strategic Growth Plan for Retail and MSME Sectors
Indian public sector bank, Canara Bank, has unveiled its growth strategy for the retail and MSME sectors in the financial year 2026. The strategy aims to expand the bank's Retail, Agriculture, and MSME (RAM) segment, which currently constitutes about 58% of its total loan book, to an ideal 60:40 loan mix between RAM and corporate loans.
The bank's focus will be on strong credit growth in retail gold loans, vehicle, and housing loans. In the June quarter, the bank's retail book has grown by 34% to ₹2.35 lakh crore. Housing loans are growing at 14%, vehicle loans at 22%, and retail loans are expanding at a robust rate.
Canara Bank has implemented operational efficiency measures to support this growth. Dedicated processing hubs have been set up for each of the segments - retail, agriculture, corporate, MSME, and mid-corporate. Additionally, a monthly underwriting quality ranking system has been introduced to ensure consistent credit growth above 12% for four consecutive quarters.
Despite an official guidance of 10-11% credit growth, the bank is confident of achieving above 12% growth in FY26, driven by strong demand from retail and MSME clients. In the first quarter of FY26, the bank recorded a 12.42% increase in global gross advances to ₹10.96 lakh crore, with the RAM segment growing at around 15% year-on-year.
Regarding deposit mobilisation, the bank is facing margin pressure due to the significant gap between term deposit rates and CASA rates. Domestic deposits rose 9% year-on-year to ₹13.39 lakh crore by Q1FY26, with term deposits growing 11% to ₹9.43 lakh crore. However, CASA deposits, which are typically cheaper, posted a modest growth of 3.7%, reaching ₹3.95 lakh crore. The bank plans to continue focusing on deposit mobilisation while controlling costs.
In summary, Canara Bank's strategy balances robust credit growth in the retail/MSME sectors with careful margin protection and improving asset quality, reflected in reduced gross and net NPA ratios. The bank's Q1 net rose by 22% to Rs 4,752 crore due to treasury gains. The secured personal loan product launched last April is growing at around 22-25%. Education loans are also a focus area for the bank. The bank does not see any challenge in mobilising retail term deposits, which are growing strongly. Once term deposit rates fall below 5%, CASA growth will pick up again. Currently, term deposits are still above 6%.
| Aspect | Details | |--------------------------------|--------------------------------------------------------------------------------------------------| | Growth Strategy (Retail/MSME) | Expand RAM portfolio to 58%-60% of total loans; focus on retail gold, vehicle, housing loans; use processing hubs and quality underwriting supervision | | Credit Growth Outlook (FY26) | Target over 12% credit growth; Q1FY26 already at 12.42% growth; RAM loans growing 15% YoY | | Deposit Mobilisation | Domestic deposits up 9%, term deposits +11%, CASA deposits modest +3.7%; emphasis on mobilisation amid margin pressure |
- Canara Bank's strategic growth plan for the financial year 2026 includes expanding the Retail, Agriculture, and MSME (RAM) segment of its loan book, striving for a balanced 60:40 loan mix between RAM and corporate loans.
- The bank's focus on strong credit growth includes retail gold loans, vehicle, and housing loans, with the retail book growing by 34% in the June quarter alone.
- To support this growth, Canara Bank has implemented operational efficiency measures, such as setting up dedicated processing hubs for each segment and introducing a monthly underwriting quality ranking system.
- Despite an official guidance of 10-11% credit growth, Canara Bank anticipates achieving above 12% growth in FY26, driven by strong demand from retail and MSME clients.
- The bank faces margin pressure due to the significant gap between term deposit rates and CASA rates, yet it plans to continue focusing on deposit mobilisation while controlling costs.
- Canara Bank's strategy balances robust credit growth in the retail/MSME sectors with careful margin protection and improving asset quality, demonstrated by reduced gross and net NPA ratios, as well as a Q1 net rise of 22%. The bank also focuses on the secured personal loan product, education loans, and expects no challenge in mobilising retail term deposits.
