Demonetisation has helped Karnataka Bank grow low-cost deposits: MD

The demonetisation move by the Centre on November 8, 2016, has helped Karnataka Bank strengthen its CASA (current account, savings account) base.

Replying to a query by a shareholder on the impact of demonetisation on Karnataka Bank at the 93rd annual general meeting here on Monday, Mahabaleshwara MS, Managing Director and Chief Executive Officer, said it has helped the bank increase its share of CASA in total deposits, thus helping bring down the cost of deposits in the bank.

The share of low-cost deposits of the bank, which stood at around 25 per cent pre-demonetisation, increased to 29 per cent after demonetisation.

“We were under the impression that it was a temporary infusion to the banking sector, and once the demonetisation is over we were thinking that at least 50 per cent of this amount would go off. Fortunately, we were proved wrong as a majority of this remained in the banking sector,” he said.

The bank’s CASA deposits stood at 28.94 per cent at the end of June.

During the demonetisation period, there was currency inflow of around ₹4,000 crore.

The bank, which had opened its rights issue for subscription on November 7, had to extend the date of closure by a week. Many small shareholders had cited difficulty in subscribing to the rights issue because of a huge rush in bank branches following demonetisation. In spite of this, the rights issue got over-subscribed by 1.85 times, he said.

He also thanked the 8,000-strong employees of the bank for handling the situation in an effective and efficient way.

Terming demonetisation as a cleansing opportunity for the Indian economy, Mahabaleshwara said: “Whenever long-term gains are there, short-term pain is inevitable.”

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