Tamilnad Mercantile Bank (TMB) is planning to grow the proportion of low-cost current account, savings account (CASA) deposits in total deposits to about 35 per cent in three years or so from the current 29 per cent by expanding branch network in the north States like Uttar Pradesh and in the north-east.

Within total deposits of ₹47,766 crore, CASA deposits of the Thoothukudi-headquartered bank stood at ₹13,736 crore as at March-ended 2023.

Higher CASA deposits help banks bring down their cost of deposits and improve the spread (interest rate charged on loans minus interest rate paid on deposits).

The bank, which was established in 1921, has a regional concentration in southern India, especially . Out of total 530 branches, 386 are in Tamil Nadu. The bank now wants to diversify into other high growth regions of the country.

Geographical strategy

S Krishnan, MD & CEO, noted that as part of its geographical diversification strategy, TMB has made a beginning by opening a branch in the north-east (Guwahati, Assam) recently.

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He emphasized that when the bank expands its network this year (2023-24), it will focus on other countries where it does not have a presence and where there is a good potential for business.

Undoubtedly CASA is lower at 29 per cent. But…if you analyze (for the banking industry), mostly it (CASA deposits) will be from belts like north-east and states like Uttar Pradesh…That is where it is coming from. So, that is another reason why we will be expanding.

“So, going forward, we will be expanding in those places where we have good potential for CASA…as a conservative guidance to the street, we will be taking the CASA to 35 per cent in another 3 years or so,” Krishnan told analysts. He said the bank plans to open about 50 branches in FY24.

Tech investments

On the technology front, the bank is likely to invest around ₹200 crore to ₹250 crore over a period of three years.

“As far as the technology/ digital front is concerned, we are in the catch up mode. We need to catch up, which is a statement of fact. But there is enough business in the market. It is not that only those banks who have already got the technology are able to get the business…enough market is available,” Krishnan said.

Advance growth

The bank expects advances to grow by 12-15 per cent in FY24, with the focus continuing to be on the RAM (Retail, Agriculture, Micro, small and medium enterprises) segment.

In FY23, total advances had grown by 11 per cent year-on-year(yoy ) to ₹37,582 crore. RAM advances accounted for 87 per cent of total advances, with the balance being accounted for by corporate advances.

“The (87:13 RAM: Corporate advances) mix may vary a little here and there, but the focus will continue to be on the RAM segment where we have totally diversified risk — no concentration risk, and that is the area where the entire nuances are well known to the bank,” Krishnan said.

The old-generation private sector bank plans to gradually change the advances mix.

In this regard, the TMB chief revealed that the bank may start with the mid-corporates where it may take an exposure of, say, ₹100 crore to ₹300 crore instead of going to the large corporates with, say, ₹1,000 crore or so.

So, we will be slowly growing from this (RAM) to the mid-corporate and then to the large corporates also. This will be one path which we will be adopting. At the same time…we are very keen on good corporates also where we are comfortable, where we understand the business, where it suits the policies of the bank,” he said.

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