CSB Bank Adopts Cautious Stance on SME Lending Amid India-US Trade Deal Uncertainty
CSB Bank will take a measured approach toward small- and medium-enterprise (SME) lending until there is clarity on the India-US trade deal, said Pralay Mondal, Managing Director & CEO, during the lender’s post-earnings interaction.
On Wednesday, the bank reported a net profit of ₹160 crore, up 16% year-on-year for the July–September quarter.
“We are a little cautious on the SME segment at this point until we have clarity on the bilateral deal — especially in sectors like textiles,” Mondal said. “It will depend on how the environment shapes up over the next 1-2 months.”
Growth Targets and Portfolio Mix
For FY 2025-26, CSB Bank aims for loan growth of 25-30% and deposit growth of 20-25%.
As of September 30, the bank reported a 29% year-on-year rise in advances and 25% growth in deposits.
During the quarter, disbursements increased 50% YoY to ₹13,001 crore, though growth moderated in retail and wholesale segments.
The bank has also begun scaling down its loan-against-security (gold) book, which was earlier classified under retail.
“After the RBI’s revised guidelines, we have started winding it down and aim to bring it down as low as possible by April,” Mondal said.
He added that CSB Bank remains cautious on credit cards and unsecured loans, while expecting growth in wholesale lending in upcoming quarters.
Focus on Agriculture and PSL Compliance
CSB Bank plans to expand its agriculture book in the second half of the financial year.
“A large part of our agriculture business links to gold owners. From a Priority Sector Lending (PSL) standpoint, we are net sellers in the market,” Mondal explained. “Our agriculture book currently stands at about 3%, and we are building capacity to grow it.”
Financial Performance Snapshot
Net Interest Income (NII): ₹424 crore (up 16% YoY)
Other Income: ₹349.2 crore (up 75% YoY)
Net Interest Margin (NIM): Improved to 3.81% from 3.54% in the previous quarter
Asset quality also improved:
Gross NPA: 1.81% (vs 1.84% QoQ)
Net NPA: 0.52% (vs 0.66% QoQ)
The bank targets a credit cost of around 50 basis points (bps) over the next 2-3 years.
“We expect to stay within 40-50 bps, and if recoveries improve, it could even fall further,” said Mondal.
Stake Reduction by Fairfax India Holdings
On Fairfax India Holdings Corporation reducing its stake in CSB Bank, Mondal confirmed that the move aligns with regulatory requirements, noting,
“As per policy, they will need to bring it down further.”
Outlook
Despite external uncertainties, CSB Bank remains positioned for steady growth, leveraging its strong gold-loan franchise, improving margins, and stable asset quality.
The focus will remain on balanced growth across retail, wholesale, and agriculture, while maintaining prudence in SME and unsecured segments.
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