Corporation Bank is chanting the ‘you scratch my back and I'll scratch yours' mantra when it comes to extending credit to corporates.
While sanctioning loans, the bank will insist that corporates open salary accounts of at least one division or unit.
The bank has hit upon this strategy to grow its current account savings account (CASA) deposits, which at 25 per cent of total deposits is lower than the 35-40 per cent prevalent among public sector banks.
For every large corporate loan that Corporation Bank sanctions — be it on a standalone basis or in consortium with other banks — the bank will insist that salary accounts of that company's staff be opened with it. This way the bank hopes to tap CASA deposits.
More Branches
To improve the proportion of CASA deposits in the total deposits, the bank plans to open 200 branches, mostly in the semi-urban and rural areas in the North, East and West, every year over the next five years.
The immediate target is to add 190 branches to the network of 1,177 before December. The branch network is essential for its plan to improve retail focus.
Besides aggressively chasing low-cost retail deposits, the bank plans to step on the gas by targeting Rs 1,000-crore growth in its retail loans in the October-December festival season.
To garner more retail business — be it home loans, car loans or personal loans — the plans to leave its base rate unchanged at 7.75 per cent till the business target is achieved.
During the festival season, the interest rate on home loans in the first year will be 7.75 per cent. Similarly, car loans and personal loans will be available at 8 per cent and 10 per cent respectively in the first year.
Good response
Currently, retail loans account for 20 per cent of the bank's total advances of Rs 63,202 crore.
The plan is to increase the proportion of retail loans to 25 per cent of the total advances to diversify the risk
of the credit portfolio.
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