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Corporation Bank sets Dec Q NIM target at 2.60%

NIM is the difference between what a bank earns through interest and fees and what it pays on the same heads.

Written by Agencies | Mumbai | Published: October 8, 2012 10:52:08 am

State-run Corporation Bank is targeting to increase its net interest margin (NIM) up to 2.60 per cent by the December quarter given the softening deposit rates and a pick-up in retail deposit garnering.

“Corporation Bank is having a lower net interest margin,the key component of a bank’s profitability,which we are improving to 2.50-2.60 per cent by December,” chairman and managing director Ajai Kumar said.

NIM is the difference between what a bank earns through interest and fees and what it pays on the same heads.

The Mangalore-headquartered bank had posted a heavy dip in NIM at 2.29 per cent in the June quarter from the 2.75 per cent in the year-ago period due to a jump in its cost of funds.

Kumar said the bank’s cost of funds is going down lately due to the deposit rate cuts while a recent directive by the Finance Ministry to shed bulk deposits has also helped.

“The interest rates on deposits have softened,which was the single most important factor which was increasing cost of deposits and lending rate was going high,” he said.

Kumar said factors like new savings schemes launched by the bank and an increased thrust in rural areas,apart from the softening on the deposit rates,will help the bank firm up its NIM.

Share of the low-cost current and savings accounts (Casa) deposits is low,which is gradually being increased,he said.

The bank is also shedding the bulk component in its total deposit base,which had stood at Rs 1,34,103 crore in the June quarter,in accordance with the directive from North Block.

It is targeting to get it down to 25 per cent from the current 36 per cent,Kumar said,adding that long term goal is to reduce it to 15 per cent,though it could be uphill task.

On the retail assets front,Kumar said the retail loan disbursements have grown almost threefold in the first half.

Retail loans have gone up to Rs 2,000 crore during the first two quarters from the Rs 700 crore in the same period in the year ago period,due to the launch of new products such as car plus home loan combo offering.

Kumar said the bank will achieve the 20 per cent credit and deposit growth targets as well.

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