City Union Bank aims to maintain CD ratio at 83-84% and lower NNPA ratio to 1-1.25% by FY25

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Private sector lender City Union Bank is targeting to maintain the credit-deposit ratio (CD ratio) at 83-84 per cent and lower net non-performing asset (NNPA) ratio to 1-1.25 per cent in FY25, MD & CEO N Kamakodi told businessline. 

“In the June quarter, our credit growth started improving and we achieved double digits. Deposit growth is almost matched for meeting the requirement of incremental credit. Now we feel we should reach the industry-level growth rate by the end of 2024. For this, fine-tuning of deposit rate has happened, in fact, we recently introduced a deposit scheme for 333 days with 7.5-8 per cent rate of interest,” he said. 

The bank’s overall advances increased by 10 per cent in Q1FY25 to ₹46,500 crore, while deposits grew by 6 per cent to ₹54,900 crore. The MD said that while deposit mobilisation is a challenge across banks, over multiple decades and various cycles, it has been observed that deposit and credit growth will not always be equal. 

Deposit growth

“In a few seasons, deposit growth will be more and vice-versa. The bulk of deposit is going to mutual funds now and that’s why deposit growth of the system is slow. To what extent it will structurally play out will be known over a couple of cycles…,” he said. 

The bank recently started offering digital loans for micro, small and medium enterprises (MSMEs) up to ₹7.5 crore loans, Kamakodi said, through which 70-80 per cent sanction decisions are being taken by the bank’s digital infrastructure.

The lender plans open around 75-100 branches in the current fiscal, leading to an overall branch network of around 900 branches. 

Asset quality

On the asset quality front, Kamakodi said for the last more than 2-3 quarters, the bank is reporting lower slippages than total recoveries, leading to lower gross and net NPA ratios of 3.88 per cent and 1.87 per cent, respectively, as of June end. Its stressed account numbers too are at “historical lows”, he said, adding that net NPAs will likely moderate to 1-1.25 per cent by FY25 end.