IOB bucks the Q1 industry trend to grow CASA in absolute & percentage terms

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Indian Overseas Bank (IOB) has probably become the only bank that has managed to improve its CASA (Current account-Savings account) ratio year-on-year and quarter-on-quarter basis as the Chennai-headquartered Bank reported a strong growth in net profit and interest income, and improvement in asset quality in the first quarter of this fiscal.

“We have been able to grow our CASA in absolute terms as well as percentage terms both y-o-y and q-o-q,” said Ajay Kumar Srivastava, MD and CEO of the IOB.

The Bank’s CASA ratio improved to 44.14 per cent in Q1 of this fiscal from 43.07 per cent in the year-ago quarter and 43.74 per cent in March 2023 quarter. Total CASA increased to ₹1,16,694 crore as on June 30, 2023, from ₹ 1,12,012 crore a year-ago.

Two-pronged strategy

Going by the results announced by the banks so far, some have managed to grow y-o-y, while some others saw improvement in q-o-q. A few banks have seen a drop in the CASA ratio in June 2023 quarter.

Srivastava told businessline that a two-pronged strategy helped IOB improve its CASA ratio. “First, we revamped our savings bank and current schemes, which we have not revisited for more than 10 years. As most of the schemes were outdated and their features were not updated. Now they have been updated for the current trends.”

Revamp of legacy schemes has helped IOB increase its customer base. In the past 3 months, it has been able to onboard almost 50,000 new current account customers, and in these new accounts the total balance is about ₹600 crore. “On a daily basis, we are onboarding new customers and our focus is to activate 3,020 branches as each branch should be made to contribute to this,” he added.

Secondly, the bank didn’t go aggressively on bulk deposits (as rates are too high). We didn’t fall into that trap and focused on retail term deposits and CASA. These two factors helped us exhibit positive growth in CASA.

IOB in Numbers

The PSU lender has reported a 28 per cent increase in its net profit at ₹500 crore in Q1 of this fiscal when compared with ₹392 crore in the year-ago quarter, helped by higher interest income.

Total income grew 24 per cent to ₹6,227 crore when compared with ₹5028 crore. Interest income grew 22 per cent to ₹5,424 crore (₹4,435 crore in Q1 of FY23). Other income was also higher at ₹803 crore as against ₹593 crore, aided by recoveries and written-off accounts.

Provisions for NPAs were also higher at ₹809 crore (₹133 crore).  “The key reason is that we have gone for accelerated provisioning for some accounts, which are demanding 100 per cent provisioning in Q3 and Q4 of this fiscal,” he said.

The bank’s slippages were at ₹535 crore in June 2023 quarter. There were no big accounts as slippages pertained to RAM (retail, agriculture, and MSME) segment. The slippage ratio was 0.31 per cent as IOB has been able to control slippages.

In Q1 of this fiscal, IOB recovered about ₹885 crore, of which ₹407 crore came from technically written-off accounts. In this total recovery, ₹740 crore was cash recovery. “Going forward too, our slippages will be lower and recovery will be higher than that,” he said.

For the June 2023 quarter, the gross NPA ratio fell to 7.13 per cent from 9.12 per cent in the year-ago quarter and 7.44 per cent in the preceding quarter.  Net NPA stood at 1.44 per cent as against 2.43 per cent in Q1 of FY23 and 1.83 per cent in Q4 of FY23.  

Gross Advances increased to ₹191,263 crore as of June 30, 2023 (₹1,63,544 crore as of June 30, 2022). Total deposits increased to ₹2,64,401 crore (₹2,60,045 crore as of June 30, 2022).