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Canara Bank is hopeful of maintaining its net interest margin (NIM) at about 3 per cent during the current fiscal, despite pressure from interest rate hike announced by the RBI in its recent credit policy. As on March 31, 2011, the bank's NIM stood at 3.12 per cent, over 30 basis points higher than the year-ago period.
On Thursday, the bank announced a 50-basis-point increase in its base rate to 10 per cent, and its BPLR has also gone up to 14.25 per cent from 13.75 per cent.
According to Mr S. Raman, CMD, Canara Bank, the actual impact of the RBI's recent credit policy, in which it hiked the repo rates by 50 basis points, could be much more than what the bank has passed on to its loan customers through the base rate and BPLR hikes on Thursday.
He also indicated that there could possibly be some blip in the first quarter of the current fiscal. “But if and when it is possible to pass on, we will,” he said, adding, “I think we will be able to maintain 3 per cent net interest margin this year”.
Rates may rise further
He also said that it was very likely that interest rates could go up by another 75-100 basis points this year. It will be front-loaded depending on how the inflation pans out. If the inflation is controlled, front-loading will be less. May be further increases could be 25 bps rather than more. If inflation is not controlled, maybe the RBI will look at another increase of 75-100 basis points. But at this point of time, it is not a serious worry as far as retail credit portfolio is concerned.
Besides, the additional provisioning for restructured portfolio, as required by the recent credit policy, is not more than Rs 20 crore, while provisions for other NPA accounts could be about Rs 220 crore, said Mr Raman.
Considering the increase in rate of interest, treasury income is “not bound to be robust”, he said, adding that it will be muted in the half of this year. “Treasury-wise, the first half of this fiscal will be difficult,” he pointed out.
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